Talking Turkey About Debt and the Economy: We’re Spent

I sure can’t see how the deficit-reduction debacle that has the Prez and Congress frozen is going to play out. Yesterday the so-called Gang of Six made a comeback with a plan to shave nearly $4 trillion from the deficit through spending cuts and revenue increases.

Hmm. Revenue increases. House Republicans still don’t seem to be thrilled by that. Here’s from WaPo, “New debt plan gain support in Senate; House passes balanced-budget measure“:

Neither Obama nor Boehner embraced the specific details of the Gang of Six proposal, and it was not immediately clear how the strategy might influence debt-limit negotiations. House Majority Leader Eric Cantor (R-Va.) said in a statement that the plan contains “some constructive ideas for dealing with our debt,” but he objected to the revenue goals, arguing that “a tax increase is the wrong policy to pursue with so many Americans out of work.”

Well, the Prez has invited members of Congress to the White House again today and said that it is time to “start talking turkey” about reaching an agreement.

Hey. I enjoy talking turkey as much as anyone. Gobble. Gobble. But it concerns me that, as the Prez noted yesterday, we’ve reached the eleventh hour and everyone still appears to be talking in generalities from working papers and outlines. Wonder if where you work this would be acceptable on an important project? I digress.

Anyway, if Eric Cantor is at the White House today with his hand covering his lips you’ll know that either he is talking ham not turkey or he doesn’t want anyone to read his lips on hiking taxes. I digress again.

But I would like to see some specifics. For instance, while chasing the treadmill belt this early a.m. I heard on Fox News that the Gang of Six plan includes measures to eliminate deductions on mortgage interest and charitable contributions. Really?  Might be good. Maybe not. Yet it sure seems like every time Congress and the Prez wait until the clock strikes twelve to do something it turns to shit goes from bad to worse.

And people — even me — understand the relationship and pitfalls off spending too much and taking on too much debt. That’s the reason the economy is flatlining and we’re not as a nation generating near enough new jobs. Here’s an interesting perspective on the economy from David Leonhardt in the NYT, “We’re Spent“:

THERE is no shortage of explanations for the economy’s maddening inability to leave behind the Great Recession and start adding large numbers of jobs: The deficit is too big. The stimulus was flawed. China is overtaking us. Businesses are overregulated. Wall Street is underregulated.

But the real culprit — or at least the main one — has been hiding in plain sight. We are living through a tremendous bust. It isn’t simply a housing bust. It’s a fizzling of the great consumer bubble that was decades in the making.

The auto industry is on pace to sell 28 percent fewer new vehicles this year than it did 10 years ago — and 10 years ago was 2001, when the country was in recession. Sales of ovens and stoves are on pace to be at their lowest level since 1992. Home sales over the past year have fallen back to their lowest point since the crisis began. And big-ticket items are hardly the only problem.

The Federal Reserve Bank of New York recently published a jarring report on what it calls discretionary service spending, a category that excludes housing, food and health care and includes restaurant meals, entertainment, education and even insurance. Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.

The past week brought more bad news. Retail sales in June were weaker than expected, and consumer confidence fell, causing economists to downgrade their estimates for economic growth yet again. It’s a familiar routine by now. Forecasters in Washington and on Wall Street keep saying the recovery’s problems are temporary — and then they redefine temporary.

If you’re looking for one overarching explanation for the still-terrible job market, it is this great consumer bust. Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future (and many have discovered that they don’t need to buy a new car or stove every few years). Both consumers and executives are easily frightened by the latest economic problem, be it rising gas prices or the debt-ceiling impasse.

Earlier this year, Charles M. Holley Jr., the chief financial officer of Wal-Mart, said that his company had noticed consumers were often buying smaller packages toward the end of the month, just before many households receive their next paychecks. “You see customers that are running out of money at the end of the month,” Mr. Holley said.

Gobble. Gobble.

Just sayin’.

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