New data coming out of the U.S. shows that the U.S. economy is deteriorating, if indeed it has ever reached the recovery stage. Yet, the Obama Administration and Republican Congress cannot overcome their standoff and finally decide on a unified front to deal with the economy.
Last week, a barrage of bad news hit the financial press. First came reports showing that more Americans have been laid off and were seeking unemployment benefits. Then came the news that mid-Atlantic states’ manufacturing had declined to the lowest levels this year. Finally, most North American markets took a beating. Adding to the general feeling of gloominess was the Congressional Budget Office (CBO), which came out to say that the recovery that allegedly started mid-2009 was wishy-washy at best.
CBO is non-partisan, so its predictions should have more credibility since it does not cater to anyone. Anyway, the CBO predicted that the U.S. economic output would grow only two percent between the fourth quarter of 2010 and the fourth quarter of 2011. As for the unemployment rate, it is expected to remain high at least until 2014, when it may drop to five percent, barring any serious withdrawals into a double-dip recession. Partisan or not, someone had to ring the wake up bell on the collective denial that government stimulus policies have worked and that private demand was gaining momentum.
Not too long ago, as the first quarter ended with a loud bang, the U.S. government and policymakers perceived such performance as proof that they had made the right moves in response to the crash of 2008. What happened in the months since unfortunately proved them wrong.
President Obama was the first to blink. Last week, he urged Republicans to stop blocking his bills just for the sake of blocking them. Currently on the electoral menu is the $30.0 billion that the Administration wants to give community banks and another $12.0 billion it wants to provide to small businesses in the form of tax cuts. But, with mid-term elections threatening to tilt the balance of power in Congress, Republicans have little incentive to work with the President. Why would they, when most Americans think it’s the President’s fault that the recovery is not going as well as everyone was hoping it would. Yet, what most seem to forget is that, without all levels of government working together, there will be no recovery.
“There will be plenty of time between now and November to play politics. But the small business owners I met this week, the ones that I’ve met with across the country this year, they don’t have time for political games. They’re not interested in what’s best for a political party,” said President Obama last week.
Republicans have ammunition in their own arsenal, too. Their main weapon is refusing measures that would further widen the budget deficit. And therein lies my own conundrum. I’m truly afraid of the budget deficit, predominantly its massive size. On the other hand, I understand that, once the road of aggressive economic stimulus was taken and both the old and new Administration, together with Congress, have agreed on it, I don’t see an easy way back or away from it. Still, what frightens me the most is the stalemate that leads to indecisiveness and ineffectiveness, the kind that is stalling things right now.