I’ve talked a lot about economics lately, but have not been so focused on the economy itself. The last time I did was in January to make a couple of predictions for the US. I’ve been spot on so far with my prediction for oil. I said we might not see $130 oil, but $100 oil was a likely scenario. Likewise for $3.50 gas.
I should have made a more accurate call on employment. Instead of the unemployment rate, I should have been talking about job growth. And so far things are not looking good. Many believe, myself included, that we need to be adding at least 200,000 jobs per month in order to bring down the unemployment rate. So far we’ve kind of been doing that. But results for May have not come out and they are expected to be disappointing.
Expectations for gross domestic product (GDP) have also been falling from every outlets that makes predictions. This includes government agencies and private companies alike. No one is yet concerned about us slipping into another recession, but it’s certainly being thought about.
And we’re still waiting on the inflation we all know is coming. It’s only a matter of time and all we can really hope for is to have a strong enough economy that The Fed can change its policies to fight inflation instead of keeping us out of a recession. No it is not as easy as I just described either.
Meanwhile our government is busy fighting over whether or not we can continue to borrow money. It’s a political move and everyone knows it. The logic boils down to one very simple statement. The House GOP is worried that our increased borrowing is going to catch up to us and cause economic disaster. Instead of trying to stop that from happening, they are willing to cause the economic disaster themselves by cutting off their ability to borrow. In other words, the debt ceiling is a political tool to make it clear they don’t want to increase spending. They will have to raise the ceiling if they want to get reelected. So it will happen. I applaud their efforts here but this isn’t the arena to do it. Pass the debt ceiling and make your stand on the next budget. This debt ceiling stuff will be a non-event.
Instead they could actually be working on the budget directly. This is like trying to cut off your wife’s credit card instead of actually sitting down and talking to her about her spending and working on a solution. It’s just going to leave everyone pissed at you. You can be a hero without being a jerk. I for one believe in the GOP, but so far so weak.
It is my hope that the economy can continue to grow, and that jobs take off. But the indicators people watch for such growth have been disappointing lately. They will likely stay that way through most of the summer so we must hope for some strength going into the fall. Without it the leverage for reducing government spending will melt away like my motivation to run in a heatwave.
 By The Weakonomist |
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