Our Views: More waiting on Congress?

Here’s the counterintuitive report on the economy: The price of gasoline is down, but the mood of consumers appears to be going in the same direction.

“Although declines in energy prices are now providing some support to consumers’ purchasing power, households remain concerned about their employment and income prospects and their overall level of confidence remains relatively low,” the chairman of the Federal Reserve system told Congress on Tuesday.

That message from Ben Bernanke reflected not only the jitters of consumers but the jitters in the stock markets, in light of some bad statistics — or at least, not-so-good statistics in some areas.

Manufacturing growth slipped and despite record-low interest rates, which also help household budgets through refinancing, the economy continues to sputter.

Bernanke told the Senate Banking Committee that the economy, after growing at an annual rate of 2.5 percent in the second half of 2011, slowed to roughly 2 percent in the first three months of this year and likely weakened further in the April-June period.

The economy likely will continue to expand moderately, he said. But meager growth could slow further if Europe’s debt crisis worsens.

Not least, there’s the problem of putting the U.S. government’s balance sheets in order: Bernanke pointed to the Congressional Budget Office’s warning that the economy could suffer a shallow recession next year if Congress fails to reach a budget deal that would avert steep tax hikes and across-the-board spending cuts.

“The most effective way that the Congress could help to support the economy right now would be to work to address the nation’s fiscal challenges in a way that takes into account both the need for long-run stability and the fragility of the recovery,” Bernanke said. “Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence.” Unfortunately, we’d bet on later: Mired in dysfunction and partisanship, the Congress is unlikely to do much of anything before the election.

The solution, for everyone not running for office, is pretty obvious. A mix of tax increases, spending cuts and elimination of some major-dollar tax breaks — for both consumers and businesses — is needed to put the kind of numbers on the scoreboard to alter this stagnant game in the fourth quarter.

But the players in Congress wear different jerseys, and the obvious is not what is politically palatable.

Partisan gridlock makes Bernanke’s testimony almost a pathetic plea at this point in the political calendar.

Comments

1) Comment by ScotB - 21/07/2012

It takes two sides to have partisan gridlock. Let's talk about something EXTREMELY fundamental. The Senate has not passed a budget in 4 years. For the first two of those four years, the Democratic party controlled the House, the Senate, and the White House. There appears to be something other than partisan gridlock preventing the government from doing its job, from an objective analysis.

2) Comment by InPVille - 21/07/2012

@DMJ: "We already have low taxes; this is one of the reasons the debt keeps piling up." No matter what the tax rate, debt can only pile up if you are spending more money than the amount of incoming tax revenue. Without a doubt we need both to increase the amount of taxes coming into the federal government if we are ever going to get the nation's budget under control. However, when in the past Congress has voted into being new taxes with the promise of future spending cuts, we have either never seen the promised spending cuts or we have seen only reductions in the amount of the spending increases which still amounted to increased spending. FIRST demonstrate that Congress is serious about controlling spending and THEN we can discuss tax increases. IF that is not the order of things, the only reasonable expectation is that the amount of debt will continue to increase with the inevitable further decline in the nation's credit rating and an increasingly intolerable situation for future generations.

3) Comment by DMJ - 20/07/2012

Boehner, Obama and the Senate had an agreement in the works last year, one that relied much more heavily on spending cuts than on tax increases. Boehner couldn't get the House on board with it. The Tea Party is the worst thing to happen to politics in this country since the John Birch Society. The good news is...Neither Obama nor Romney are idealogues. Whoever wins, I believe they'll get the debt situation under control, or at least begin to. That is, unless the Tea Party sabatoges it again. We'll see... For those pushing for spending cuts alone, be reminded that taxes are at a historically low % of GDP right now, the lowest in over half a century. We already have low taxes; this is one of the reasons the debt keeps piling up.

4) Comment by tradewinns - 20/07/2012

i am glad the commenters have one voice, especially because i agree with them. if we must increase taxes, so be it. but everyone must pay something. the budget must be cut severly, but (IMO) not where it is productive (i.e. road construction, etc.) fraud should be rooted out with horrible penalties for those defrauding the system (50% of earned income credit is fraudulent) as long as it is "profitable" to cheat the system (the benefits outweigh the penalties) this type fraud will continue and expand. the federal government does little to nothing to try and stop these crimes because those who run the federal branches are "ranked" by the amount of cash they handle. the more cash you move the higher the esteem you are held. it should be the reverse.

5) Comment by [e-mail] - 20/07/2012

A viable third party? No Watson, what's needed is a return to the philosophy that started this country and nourished it until progressives managed to "Bruderbund" it.

6) Comment by [e-mail] - 20/07/2012

Once more the "Our Views" parrots as an opinion have managed to come up with nothing but talking points from an administration that hasn't worked since it came into office. No matter how you slice it there is no incentive for the economy to get better until everybody pays instead of collecting taxes. 10% of the American public is permanently disabled these days because that's the way to get full benefits from SS; roughly half pays no taxes at all except sales tax which entitles them to a "refund" and a bigger check from the IRS when they fill out their "dependant child credit" which is so corrupt that it would be laughable if I didn't have to pay for it. Taking more from the people who pay taxes just to give it to people who don't to buy their vote, and then demonizing the only people working and paying those taxes is what's wrong.

7) Comment by InPVille - 20/07/2012

@lovemykids: " Does any of the leadership (democratic or republican) in congress have enough sense or backbone to push for some tax increases and some budget cuts. This is why we need a viable third party in this country." -[**]- There have been recent video on the nightly news showing Democrats threatening to reprise the Republican tactic of refusing to vote to approve increasing the national debt limit should the Republicans not approve tax increases. Unfortunately in the lingo of Washington a budget cut has been redefined to mean a decrease in the predetermined rate of budget increase. So even if Congress votes on a budget cut, in reality there may be no actual budget cut. -[**]- SHORT ANSWER. It is unlikely that leaders of either party have the sense, backbone, or ability to bring about both.

8) Comment by jdk944 - 20/07/2012

The Advocate must have written this article 2+ weeks ago and didn't update it. Gas has went up 32 cents in the last 2 weeks!! So it's not going down!! And how about focusing on budget cuts, budget cuts, budget cuts. That includes eliminating a huge chunk of fed. government depts. that aren't needed!!

9) Comment by lovemykids - 20/07/2012

Does any of the leadership (democratic or republican) in congress have enough sense or backbone to push for some tax increases and some budget cuts. This is why we need a viable third party in this country.