By Rick Manning – Where is the irrational exuberance?
Where is the stock market celebration that a grand deal has been cut and the nation has been saved from certain doom because the debt ceiling was raised, and Washington, D.C. can go back to spending $125 billion more than it brings in every single month?
Where is the international sigh of relief, as America starts borrowing again?
If you are shocked that the Wall Street Journal would have a headline on Wednesday that read, “Dow, Nasdaq Tumble in Global Rout” just two days after the momentous deal to solve America’s debt crisis was signed into law by the President, you weren’t paying attention.
Contrary to what Washington’s artificial deadline obsessed politicians bleated continually as their willing conspirators in the media brought America into crisis mode, the debt crisis was never really about raising the debt ceiling.
The debt crisis was about putting our nation’s finances on the type of sound financial pathway that would restore the world’s faith that our economy would continue to lead the world.
The debt crisis was about our nation’s willingness to stop spending $4.25 billion more a day than our nation collected in taxes and revenues.
And the big deal between Obama, Reid, McConnell, Boehner and Pelosi has been judged and found wanting.
Now that the debt ceiling crisis is behind us, the harsh reality of America’s unresolved and largely ignored credit worthiness crisis is smacking our nation’s policy maker’s right between the eyes. And the economy is not much better.
Manufacturing data indicates that the nation’s manufacturing sector collapsed in July nearing levels associated with a contracting economy.
The nation’s Gross Domestic Product only increased 1.3 percent on an annualized basis in the 2nd Quarter of 2011, while the 1st Quarter was revised downward to 0.4 percent growth. Really bad news since all of the U.S. debt projections are based upon the assumption that the economy will grow by 3.1 percent in 2011 as projected by the Office of Management & Budget. Clearly, revenues to the federal government are going to fall far short of projections while spending continues relatively unabated.
Perhaps the poor GDP growth numbers are explained by the drop in consumer spending in the 2nd Quarter just reported by the Commerce Department. Consumers, behaving rationally, see high unemployment, uncertain economic futures, higher energy costs, homes foreclosed in their neighborhoods, and a government unable to live within its means, and have stopped spending.
With almost 14 million Americans unemployed, and millions more leaving the work force out of despair, the Obama Administration’s “new normal” economy is not just a bunch of numbers but a very, very personal issue to those struggling to seek out a living and pay their bills.
In a Bloomberg story released the day before the unemployment numbers were released by the Labor Department, Mike Ryan, the chief investment strategist at UBS Wealth Management Americas said, “The burden of proof is for better data that show the economy is not falling into recession. Tomorrow’s payroll report is crucial. If we see another disappointment, the stock market will have significant downside from here.”
The unemployment numbers are now in, and while the number of new jobs created increased, the numbers of people leaving the workforce continues to increase.
So, as Bettye Davis famously said in the movie “All About Eve”, “Fasten your seatbelts, it’s going to be a bumpy ride.”
Rick Manning is the Communications Director at Americans for Limited Government and the former Public Affairs Chief of Staff at the U.S. Department of Labor. Follow him on twitter @rmanning957.
