Around the country, there seems to be a growing realization not only that our economy is weak, but that we’re on a path that has little if any reasonable chance of turning things around.
The signs of the economic crisis itself are obvious:
• The latest employment report was the weakest one in nearly a year. There was no net increase in jobs in August, according to the Labor Department, so unemployment stayed at the same painfully high level of 9.1 percent.
• August wasn’t the only difficult month. A second look at employment figures from June and July shows that nearly 60,000 fewer jobs were produced in those months than had first been thought.
• The stock market has taken a beating, destroying massive amounts of savings.
• The average work week fell in August — at a time when many people who do have jobs need more, rather than fewer, hours. Hourly earnings also dropped.
But what is every bit as demoralizing as these dismal economic figures is the fact that many of our people do not see much likelihood that things will be getting better anytime soon.
According to numerous measures of consumer confidence, Americans are extremely pessimistic about the chances of a big, positive economic reversal. The Thomson Reuters/University of Michigan index of consumer sentiment fell last month to its lowest mark in almost two years. And the Bloomberg Consumer Comfort Index fell to a minus 49.1 at the end of August.
Part of the driving force behind that pessimism is the fact that so many homeowners have lost so much of the equity in their homes as housing prices have collapsed the past few years. Sadly, there is little indication that prices are going to rise significantly in the short term. Homeowners are paying a high price for millions of foreclosures that swept our country after Washington leaned on banks to give home loans to people who were likely to have a hard time repaying the loans.
Plunging consumer confidence itself has a harmful effect, too. Consumers — as well as businesses — are unsure what direction the economy is heading, so they are spending less and less of their earnings, driving down economic activity and reducing demand for goods and services.
We should quickly point out, however, that that does not mean consumers and businesses are to blame for the lack of growth. They are reacting in part to the economic uncertainty created by the Obama administration’s plans to follow up failed “stimulus” spending with more stimulus spending — none of which our country has the money to pay for. There is also a great deal of concern about the higher taxes that President Obama and Democrats in Congress want to impose.
And there is well-justified worry about our $14.6 trillion — and growing — national debt. Most Americans may not be economists or mathematicians, but it does not take an advanced academic degree to realize that the explosive debt simply should not be allowed to continue growing unchecked.
Large spending cuts throughout the federal government — as well as reform of entitlements, which on our current trajectory we are fast running out of money to fund — are the path to fiscal sanity.
Yes, those cuts and reforms would cause pain. No one should pretend otherwise. But that pain would be far less than the all-out misery we are inviting if we fool ourselves into thinking we should just tax, borrow and spend more.