A Self-Sustaining Recovery

Editorial in The Economist, “Can it be…the recovery?”

“For the year as a whole America’s economy will probably grow around its trend rate of around 2.5%.  That’s a lot lower than might be expected after a normal recession; but after financial crises, when consumers are weighed down by debt, recoveries tend to be anaemic.  That level of growth…could be the first step towards a self-sustaining recovery, thanks to the virtuous circle of stronger job growth leading to higher consumer spending, which in turn should generate more jobs.

“America’s priority should be to craft a medium-term plan which puts the budget deficit on a downward path without snuffing out the recovery.  There is, unfortunately, not a chance that it will do that before November’s presidential election.

“The reasons for optimism are real.  But if policymakers get it wrong again, the recovery could yet turn to dust.”  Emphasis added.

That phrase “self-sustaining recovery” captures my problem with both parties.  For me, the Democrats don’t know when to stop the government spending, while the Republicans don’t know when it’s necessary.  I believe in stimulus to get a recovery going, when consumer spending isn’t there, but when that recovery become “self-sustaining,” I want less government.  I believe that “expansionary austerity” isn’t just an oxymoron, it’s a dangerous and delusional myth.

Anybody Doubt the Tea Partiers in the House Want a Bad Economy?

The House GOP’s refusal to pass the extension of the payroll tax cut and unemployment insurance that the Senate passed overwhelmingly isn’t just silly, it’s hurting the economy right now, this very minute.

70% of our economy is consumer spending, this is the week before Christmas (kind of a significant week for consumer spending!), and Americans faced with an increase in their tax bill (typically about $1,000) or a cut-off in their unemployment benefits are probably going to spend less this season.

With the surprise and disappointment of the weekend, they might be returning stuff today, rather than buying more.

Those conservatives in the House sure are revolting, in more ways than one.