In the fairy tale, the porridge Goldilocks ate was not too cold and not too hot. It was just right.
On the roller-coaster of economic statistics, we just can’t seem to hit “just right.”
With consumer confidence down a bit, inventories not being replenished as much, and unemployment stubbornly high, there’s a lot of downers in the reports lately.
At the same time, private-sector payrolls increased and there are still signs of life in the housing market; the stock markets are up to levels not seen since 2009.
There is also a mix of good and bad news from Washington.
The Congressional Budget Office reported that the economic recovery, aided by cuts in spending agreed to by President Barack Obama and Congress, will shrink the deficit below the particularly scary number of $1 trillion.
“The federal budget deficit, which shrank as a percentage of GDP for the third year in a row in 2012, will fall again in 2013, if current laws remain the same,” the CBO said in an economic forecast. “At an estimated $845 billion, the 2013 imbalance would be the first deficit in five years below $1 trillion; and at 5.3 percent of GDP, it would be only about half as large, relative to the size of the economy, as the deficit was in 2009.”
That’s really good news, if — as with porridge — we can’t get it just right. The anemic 1.4 percent growth rate projected by CBO is influenced by federal budget cuts. Like it or not, federal spending is part of the economy.
However, that slow rate of growth depends on the president and GOP leaders in the Congress failing to reach agreement on avoiding the “sequester” cuts mandated in current law. Those cuts are completely avoidable if the parties agree to compromise in the interest of economic growth.
Neither side would like to compromise, for the porridge will not taste “just right” for each side. But in the interest of continued growth, let’s hope they do.