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.