It should be clear to everyone by now that there is a serious lack of confidence in the U.S. economy.
That has been apparent for a while in consumers’ unwillingness to spend and in businesses’ reluctance to invest. There is simply too much uncertainty about where the economy is going, so individuals and businesses alike are sitting tight until there is greater clarity.
That lack of confidence was even more starkly illustrated recently by the major drop in stock prices.
Over a period of about two weeks, the major stock indexes plummeted well over 10 percent. On Thursday alone, the Dow Jones industrial average plunged 513 points, or 4 percent.
Those are not just abstract figures. They represent losses of hundreds of billions of dollars to tens of millions of Americans. A lot of people are relying on their 401(k) plans for retirement, and those plans have been hit hard by the plunge in stock prices.
But the upfront losses may not be the worst of it.
With stock investments losing value so fast, Americans may become even less willing to spend on goods and services. That spending accounts for most of the United States’ economic growth. So when it drops — as it started doing even before the recent big stock price drop — overall economic growth is imperiled.
The problems don’t end there, though.
The housing market crisis continues unabated.
And Congress and the president have struck an entirely inadequate deal on reducing federal deficits. Total national debt is still expected to rise by trillions of dollars over the coming decade despite the deal.
Plus, the sky-high unemployment rate has been impervious to Democrats’ efforts to “stimulate” job creation with even more red-ink spending.
Heavy stimulus spending was supposed to keep down unemployment, and the too-timid deficit deal was supposed to boost the stock market. But unemployment remains at 9.1 percent, and, as The Washington Post noted, “About $1.1 trillion in stock market wealth has evaporated since the [deficit] agreement was reached.”
It seems obvious that we cannot spend our way out of the debt-caused economic quagmire we’re in.
But it seems even more obvious that Washington hasn’t figured that out.