Taking their Eye off the Economic Ball
For the last few weeks, we have been warned about how the debt ceiling and impending default was going to singlehandedly trigger a second recession and an historic economic collapse.
Our elected leaders spent the bulk of the time either participating in or observing the debates, negotiations and other conversations about the debt ceiling and the deal that both political parties wanted to make.
The debt ceiling and the potential default was the only economic issue, nay the only issue period that was of any importance.
Meanwhile, news that came out on Tuesday showed that while we were all distracted by a purely political issue, actual economic issues were actually causing our economy some serious problems.
Various economic reports released this week triggered significant stock losses across the board. Those economic reports include three important stories that we simply haven’t heard much about over the last few weeks.
First, consumer spending is down, in fact June showed the first decrease in consumer spending for two years. It may seem like a complicated economic variable, but put simply in layman’s terms, for the first time in two years, Americans are not confident that their own situation is improving enough to keep buying.
Increasing spending every month may seem a bit illogical. It might seem prudent or even a good thing that Americans save more and spend a bit less. But it’s not about spending beyond your means, it’s about confidence. And when it comes to the economy, like sports, it’s all about confidence. And our confidence is low.
Secondly, manufacturing numbers are down and that helped drive stocks down even further on Tuesday. Manufacturing is one of those key numbers that are important to our economy, but that regular folks like you and me don’t see face to face every day. Manufacturing is important because it is a direct sign of demand, and it is also a direct sign of how much we can produce ourselves.
I know that sounds repetitive, but in an era where more materials than ever before in our country’s history are made in China, direct signs of how much we can produce ourselves, and the demand for those products, are very important.
Finally, one of the hidden factors that helped spur negative stock news this week is that overall demand and growth in Asia, specifically China and India, is slowing at a greater degree than expected.
Again, common sense says that may be a good thing. China and India are competition, right?
The problem is that Asia’s slowing demand is slower demand for U.S. products, and that’s not good.
I’m not an economist, but I do know enough that even if Congress was paying attention to these issues over the last few weeks, it may not have made any difference. I also know that there are very few direct actions Congress can take to affect these particular issues.
However, wouldn’t it make you feel better if Congress was at least paying attention to the issues that really drive the economy, rather than predicting doom from a political issue that was solved as soon as the pressure was on?
Every politician knows that the top issue on everyone’s mind is the economy. Yet, when faced with the choice of tackling a political issue or actual economic issues, we know which ones they will consistently choose.
About The Blogger
- Dominic Dezzutti, producer of the Colorado Decides debate series, a co-production of CBS4 and Colorado Public Television, looks at the local and national political scene in his CBSDenver.com blog. Read new entries here every Monday, Wednesday and Friday. Dezzutti writes about federal, state and local matters and how our elected leaders are handling the issues important to Colorado. Dezzutti also produces the Emmy winning Colorado Inside Out, hosted by Raj Chohan, on Colorado Public Television.