I have to wonder just how long the GOP can keep taking America on this economic rollercoaster before we all lose our breakfast, lunch, and dinner. Everywhere you turn, it seems, there is an economic contradiction.
Economists fall back on the stock and trade of their vocation, mathematics. They have been tied in knots resorting to indicating that the data is “noisy”, or that there are defects in the way the information is calculated. If pushed, they’ll say it’s a recovery alright, , but a weak one they are quick to point out .
Even for renowned economists, it’s hard to know which indicators really matter, and just what the heck they’re telling us.
- Housing is up
- But gross domestic product was sharply down in December
- The economy has lost 3.2m jobs since 2007
- But 5.2m have been created since 2009.
- But then the number of unemployed far outpaces the number of jobs.
The Center on Budget and Policy Priorities offered this chilling fact about the ratio of workers to job openings:
“In November 2012, 12 million workers were unemployed but there were only 3.7m job openings. That is about 10 unemployed workers for every three available positions – in other words, even if every available job were filled by an unemployed individual, about seven of every 10 unemployed workers would still be unemployed.”
- The jobless rate keeps dropping
- But we have roughly the same ratio of employed-to-unemployed people that we had last year.
- The economy gained 181,000 jobs a month last year
- But the percentage of people who have been unemployed for more than 27 weeks has stayed relatively steady.
- People are working more hours
- But productivity is falling. And economic output has almost ground to a halt, growing by 0.1% in December.
What’s a Poor Number-cruncher to Do?
Households are becoming less indebted, which is great, right? Well, yes, but that’s mostly because they are defaulting on their debt. Disposable personal income is rising, cautiously, which should point toward at least a modest amount of economic improvement, but income inequality is at an all-time high, which indicates that the middle class is shrinking and more economic disparity is taking root.
It doesn’t really look like a frail, irregular recovery; it looks like a psychotic one. Instead of a good, balanced meal, we get table scraps. Which is good. We won’t starve. But we sit around and worry that the GOP and Paul Ryan may jerk even those table scraps away from us at any time.
And what’s even worse is that in roughly three weeks, Congress has yet another chance to sabotage whatever modest economic progress we’ve managed to eek out under the rampant obstructionism from the GOP since 2010.
This time around their weapon will be the sequester: the package of punitive budget cuts that are designed to slash at least $85.3bn from the federal budget this year, and by close to $1.2tn in a decade. The cuts will reduce the national deficit, sure, but it could and probably would put us in the same unenviable position that the UK and Eurozone find themselves in by deficit-obsessing…20-25% unemployment and staring down the barrel of a Great Depression. The CBO predicted just this past week that the sequester would go into effect as soon as March 1st.
One of the oddest quirks of this recovery is that a lot of the usual controls over economic growth are not in the hands of private companies; they are in the hands of Washington. The Congressional Budget Office, which is the non-partisan key-master of all economic numbers, started its report this week with this heavy-handed hint about Congress’s power to either enhance or kill the recovery:
“Economic growth will remain slow this year, CBO anticipates, as gradual improvement in many of the forces that drive the economy is offset by the effects of budgetary changes that are scheduled to occur under current law.”
Classic literature? No. But the message is pretty obvious: the CBO believes that the economic recovery is at the mercy of the sequester. Republicans will love the CBO’s conclusion that budget cuts will reduce the deficit to less than $1tn for the first time in Obama’s presidency. But it’s hard to get thrilled about the CBO’s other key conclusion: that the economy will grow at an anemic 1.4% this year. But compare it to the UK or the Eurozone and we look positively robust!
The Real Deal
This much is certain: exorbitant budget cuts will reduce economic growth and the CBO makes it perfectly clear that budget cuts at this point in time will hurt, if not cripple the economy, which is already weak.
This is not just a cold, intellectual argument over numbers. Households will reel over the fourth year of what is being called a recovery but still feels like a recession. The reduction of economic growth means it is will be harder, again, to achieve better jobs, more valuable houses, better access to loans and growing personal income. And that means that the ONLY driver of growth will again suffer–demand for more goods and services.
The sequester was never designed as a reality; it was created as a deterrent, so distasteful, so harmful, that if started, it would be economic self-inflicted political and economic suicide. The cuts would be so deep, so extreme, so that no reasonable lawmaker would ever let them pass. Yet, as the date of the sequester draws near, Congress still focuses on name-calling and blame games. In the worst case scenario, this will be another pointless, failed negotiation that will go into the 11th hour and take the economy and the American people on another rollercoaster ride with it.
One thing, it seems, is a major gauge that nothing changed over the past few years: reasonable lawmakers with “(R)s” by their names are still in short supply.
Harvey A. Gold