White House Chronicle

News Analysis With a Sense of Humor

  • Home
  • King’s Commentaries
  • Random Features
  • Photos
  • Public Speaker
  • WHC Episodes
  • About WHC
  • Carrying Stations
  • ME/CFS Alert
  • Contact Us

The Economy Is Righting, but Does Congress Get It?

January 31, 2013 by White House Chronicle Leave a Comment

The great thing about being a pessimist is that something awful may still happen tomorrow. There are still plenty of pessimists about the economy, saying that we are spending our way into perdition; that the Great Reckoning is just around the corner, unless we do draconian things.
 
However on Wall Street, there is hopefulness — even optimism. The stock market is up, the housing market is showing real life and corporate confidence has increased since the Congress delayed action on the fiscal cliff through a bit of old-fashioned give-and-take. Some economists are saying encouraging things, so are the business magazines.
 
There is evidence that the economy, which was heeling badly, is beginning to right. The U.S. economy, still the economic lungs of the world, is breathing easier.
 
Sure, there was a slight dip in performance in the last quarter, reflecting primarily reduced defense spending. It's a hard lesson for the political right to grasp: You can't extrapolate family financial rectitude into national policy, as they like to do. If a family spends more than it is earning, it simply has to cut expenditures. If it doesn’t, the end is known; credit dries up and horrors, like foreclosure, are at hand. Likewise, corporations cut costs, lay off employees and sell assets until the balance sheet recovers.
 
When a family gets into trouble, it doesn't reduce its income by cutting luxuries, it reduces its spending. When a corporation cuts back, it tries to reduce staff not customers.
 
But governments can worsen the situation when they tackle spending at the wrong time. If they cut expenditures too aggressively and too fast, revenues fall, unemployment rises and demands on the public purse grow. Unlike individuals and corporations, governments can’t walk away from their messes.
 
Witness the recessions in Britain, Ireland, Spain and the total catastrophe in Greece. Irresponsible austerity has compounded the results of earlier promiscuous spending. Strong medicine has sent the patient to intensive care.
 
Amy Kremer, head of the Tea Party Express, and many conservative members of Congress playing the pessimist’s card, like to say, and they say it often, “revenue is not the problem, spending is.”
 
If only it were that simple. The problem is many things, including the global recession, the aging population, the high cost of medicine, two wars, badly timed tax cuts, China’s undervalued currency and the balance of payments deficit.
 
Take your pick. The miracle is that the economy is as vigorous as it is.
 
Already it has to deal with the tax increases that came with the budget deal in early January, particularly the increase in the payroll tax, which takes out of the economy money that would normally be spent — the large proportion of the tax which if left in the hands of the salaried class would be disposable. This may be about as much of a hit as it can take at present.
 
But the pessimists, who believe that spending is the mortal sin of our age, want to let sequestration — a 10 percent across the board cut — happen on March 2. The Washington Post says there is no mood in Congress to compromise. But if there is no compromise, the effects could be more devastating than a simple cut in spending. The result, instead, will be a cut in program expenditures while the government’s overhead in salaries and fixed costs will eat up the budget.
 
Austerity has been a disaster for Britain, Ireland and Spain. Do we want to follow the Europeans down that path?
 
The pessimists, who also believe that borrowing is the original sin of politicians, would let this recovery falter through their belief that the government must be starved. Sequestration will starve it, alright. Trouble is we'll all go hungry. There’s pessimism for you. — For the Hearst-New York Times Syndicate

 
 
 
 
 
 
 

Filed Under: King's Commentaries Tagged With: Amy Kremer, austerity, conservatives, Europe, federal budget, sequestration, Tea Party Express, U.S. economy, U.S.Congress, Wall Street

White House Chronicle on Social

  • Facebook
  • Twitter
  • Vimeo
  • YouTube
Happy Birthday, America; Now Mind How You Go

Happy Birthday, America; Now Mind How You Go

Llewellyn King

Martin Walker, the gifted former Washington correspondent of The Guardian, used to start his speeches saying that the Fourth of July wasn’t a time for sorrow for him, as it was a time when good British yeomen farmers in the colonies revolted against a German king and his German mercenaries. Walker — who now lives […]

An Electric Revolution Is Underway, but Revolutions Are Messy

An Electric Revolution Is Underway, but Revolutions Are Messy

Llewellyn King

This, the 21st century, is set to be the electric century. We are in the middle of a profound electrification binge that is going to leave its mark, an electrical mark, on every aspect of human endeavor. I believed this before I attended the Edison Electric Institute annual meeting and convention in Orlando. Now I think […]

It Is the New Age of Creativity, Despite Shortages and Runaway Inflation

It Is the New Age of Creativity, Despite Shortages and Runaway Inflation

Llewellyn King

You could be excused for believing that everything is going to hell. We are living through a tumultuous time, and the next two years are going to be especially difficult with severe disruption to supply chains, runaway inflation and, worst of all, food shortages in much of the world. But it also may be a […]

Prepare for Blackouts Across the U.S. as Summer Takes Hold

Prepare for Blackouts Across the U.S. as Summer Takes Hold

Llewellyn King

Just when it didn’t seem things couldn’t get worse — gasoline at $5 to $8 a gallon, supply shortages in everything from baby formula to new cars — comes the devastating news that many of us will endure electricity blackouts this summer. The alarm was sounded by the nonprofit North American Electric Reliability Corp. and […]

Copyright © 2022 · White House Chronicle Theme on Genesis Framework · WordPress · Log in