Big debt portends recession
By John Browne
Published: Saturday, Dec. 8, 2012, 9:00 p.m.
The “fiscal cliff” is no accident. Created by Congress, it reflects a near total inability of politicians to curb the ever-increasing size of government and the massive burden it places on the economy.
Already, a sputtering economy is invoking great economic uncertainty around the world. As a result, corporations are curbing spending plans or cutting employees, thereby fanning the flames of a recession that likely will cause widespread poverty and more intrusive government.
On the surface, households appear to have reduced their debt significantly. Feeling more secure financially, frustrated by personal spending curbs, believing official statistics and tempted by heavily discounted prices, consumers are starting to spend this holiday season. Attracted by historically low interest rates, some shoppers are even borrowing again.
In many parts of America, house values have turned upwards as buyers sink money into what they see as “real” assets despite official inflation of just 2.2 percent. Also, sales of consumables and automobiles are rising. Despite the perilous state of the economy, consumers are throwing caution to the wind, determined to enjoy the holiday season after a sustained period of retrenchment. GDP, a measure of economic output, rose by 2.7 percent last month.
Business executives, on the other hand, appear more cautious. In October, The Institute for Supply Management Factory Index, which measures business activity, fell to 49.5 percent, indicating contraction.
In addition, Census Bureau figures showed the growth rate of new orders of durable goods fell to 2.7 percent in October from an annualized rate of 4.07 percent, evidencing a serious decline in business confidence. Although nowhere near the lows of 2009, the direction is concerning and suggests the nation is approaching recession.
All this is despite massive injections of synthetic cash and historically low interest rates by the Federal Reserve.
The U.S. is the world's largest consumer market. Should it falter, it could well unleash recession in the vulnerable economies of its major trading partners. The world's largest economy, the European Union, is already heading for deep recession. Japan's economy is flat and China's economy looks increasingly fragile.
As if uncertainty was not cause enough for alarm, the U.S. government has engaged in a much publicized display of irresponsibility, further eroding economic confidence.
Taxation threats have stimulated over 100 companies to pay ‘special' dividends this year. Rather than invest in plants and jobs they have chosen and even borrowed to reward shareholders, anticipating increased taxation that encourages massive selling of securities, housing and precious metals.
Unable to agree on urgent cuts in overly intrusive and costly government, Congress postponed a decision by creating the pending fiscal cliff. Now, Congress appears paralyzed on that economic cliff while ignoring completely talk of any cuts in big government.
Clearly, the fiscal cliff protects big government — and it is big government that is the economy's greatest threat.
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Total Trib Media. Email him at email@example.com.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Keisel might be at end of Steelers career
- Judge won’t let man suing police introduce previous complaints against officers
- Wilkinsburg man jailed in heroin overdose case
- PIAA Class AAA 126-pound semifinal stocked with WPIAL grapplers
- Man to face DUI-homicide trial for Route 28 wreck
- Romance author Macomber highlight of annual knitting festival
- Prom dress consignment sale a hit with Norwin High School students
- Mt. Pleasant’s St. Pius X serves up Lenten meals
- Southmoreland seniors to don caps and gowns June 4
- Penguins’ leads evaporate in loss to Sharks
- Randy Moss’ daughter proving to be a catch, too