Age of Austerity

Republican voters are more sour on the debt deal than Democrats, and Nate Silver says polls show House Republicans owning the debt ceiling deal, creating an opportunity for Obama:

Voters’ Pavlovian reaction may simply be that fiscal austerity equals pain, which could complicate Republican messaging in the long-run.

In the short-run — depending on what happens with the markets over the next several trading days as well as with tomorrow morning’s jobs report — the question becomes whether Mr. Obama attempts to exploit the crisis by calling for stimulative measures that were lacking in the deal he signed with Republicans.

And speaking of that job's report for July: Hiring increases, expectations don't.  Via NPR, Brookings' William Dickens isn't impressed:

The July report also revised figures for the two previous months. The economy added 53,000 in May, up from an earlier estimate of 25,000; and 46,000 in June, up from 18,000.

Even so, the economy expanded at a meager 0.8 percent annual rate in the first half of the year, the slowest pace since the recession officially ended in 2009. Those figures, combined with financial troubles in the eurozone in recent days, have ratcheted up talk of a double-dip recession and put markets on edge in the past week.

"If Europe gets its act together and we don't have any more brinkmanship in the political arena here, I can see us just limping through without a double-dip recession," Dickens said.

Surely we've seen the end of "brinkmanship" hostage taking.  Dickens argues that the Fed is out of options. Dean Baker says not so quick:

... the Fed could pursue a path that Bernanke himself had advocated for Japan when he was still a Princeton professor. It could target a higher rate of inflation, for example 4 percent. This would have the effect of reducing real interest rates. It would also lower the debt burden of homeowners, which could allow them to spend more money.

That could relieve some pressure on consumers, but the numbers today are still a little good news in a sea of bad.  Private sector growth is almost -- but not entirely -- negating public sector cut backs.  Until something different than what we're doing is done, we'll be applauding "not as bad as it could have been" right into the double dip and President Mittens!/Bachmann/Perry's first term.

Tags: jobs, recovery, austerity, stimulus, Economy (all tags)

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