Numbers Don’t Lie
They Bring Grim Economic News
As The Associated Press reported last week, “the economy grew at an annual rate of just 0.1 percent from October to December.” Those results mark the weakest quarterly results in nearly two years. And then there’s this, as Bloomberg News reported: In January, personal income dropped 3.6 percent, taking that index to its lowest level since November, 2007. Disposable income dropped 4 percent, “the biggest plunge since monthly records began in 1959.” The savings rate, Bloomberg reported, collapsed from 6.4 percent to 2.4 percent.
Those are hardly numbers that will drive a sustained recovery, and clearly the economic situation is fragile. Attending to this situation should be priority number one for our folks in Washington, but partisan politics has clearly trumped the desire of elected leaders to govern.
Still, AP noted, “[a]nalysts think growth is picking up in the January-March quarter to a roughly 2 percent annual rate.” Two percent, as a reminder, is the amount that all workers are seeing taken out of their paychecks over and above what was taken out last year. Washington ended its poor experiment with the “payroll tax holiday” after two years of reduced withholding for Social Security.
The policy was a bad idea to begin with, but try explaining to the average American that even though his paycheck is 2 percent lighter, it was not a tax increase, but only the return to the proper tax level. That job gets even harder if you are talking to someone of an age where their contributions to Social Security may never be returned to him, a subject for another day.
Economist Joel Naroff told AP that he “thinks the economy could grow at an annual rate of around 2 percent in the first quarter of 2013 and an even better rate of 4 percent in the April-June quarter.” That sounds encouraging, but “he and other economists warn that lawmakers will slow growth if they fail to reach a budget agreement indefinitely.” Ah, there’s the rub.
If we need to count on leadership from the White House and bi-partisan action from Congress to keep any fragile recovery on track, we are likely in trouble. Federal spending is out of control, but elected officials in Washington have taken no action to properly address and implement reductions that can be made without a manufactured crisis each quarter.
One could start with waste, fraud, and abuse in government programs and likely cut more from the annual budget than the dollar amount of reductions mandated in the “sequester.” American families have undergone rounds and rounds of belt-tightening during the past several years, and they have adjusted their spending to match their incomes wherever possible. An average family faced with the need to cut about 3 percent from their household expenses would simply do so by looking for areas where they don’t need to spend as much. It is likely they would not travel around their local community crying out that such a reduction would require them to no longer feed or clothe their children. We expect they would cut something else first and figure out how to live within their means.
If our economy is to mount a sustained recovery in 2013 and beyond, real unemployment needs to come down and a sustained good health in housing must take solid footing. That should happen in part because of the leadership in Washington, but we may have to hope it does in spite of the same.