Politicians all say the economy needs more jobs.
Job growth depends more than anything else on certainty about government
spending and tax policy. Yet our political leaders can’t get their act together
long enough to take any action letting us know what future government policy
will be. As a terrible result of their inaction, we have little job growth and
slower economic growth.
In 2009, the American economy declined 3.5%. In
2009 Congress enacted a package of significant stimulus spending, and in 2010
the American economy grew 3.0%. Then the 2010 Congressional calendar was used
up in government budget gridlock, with a number of quarter by quarter emergency
budget measures passed just to keep the bureaucratic doors open in Washington,
D.C. As a result, American economic growth slowed to a paltry 1.7% in 2011, and
talk of a “double dip” recession was rampant.
Learning nothing from the first year of gridlock, Congress continued to
pass band aid interim spending measures all through 2011, with no action on
those appropriation bills which set government budgets for more than a year
into the future. As a consequence, businesses that depend for some of their
revenue on having government as a customer couldn’t plan long term expansion.
Furthermore, Congressional stalemate on long term tax policy stifled business
investment decisions. This ongoing gridlock isn’t helping the American economy,
capping first quarter 2012 growth in our economy at 2.2%.
Consumers have been tightening their belts for
three years now, and first quarter 2012 consumer spending is up 2.9%. Most of
that gain is represented by higher motor fuel prices and increasing auto sales,
neither if which is a reliable long term engine of future progress. That
consumer spending growth is offset by a 3.0% drop in government spending for
the quarter, along with a 2.1% drop in business investment, stifled by ongoing
tax policy uncertainty coupled with expiration of some investment tax breaks on
December 31, 2011. Economists tell us we need year long economic growth
exceeding 4.0% to bring down unemployment by one point. Because consumer
spending is 70% of the economy, job growth is the only thing that will get us
back on track to a “healthy” overall growth rate of better than 2.5%.
Every day our Representatives and Senators leave
those important long term appropriations measures and tax reform bills sitting
on the tables in committee rooms costs the economy months and months of
sluggish growth.
