The Obama Economy Tour
12:00 AM, Jul 27, 2013 • By IRWIN M. STELZER
The unfortunate fact is that this new outbreak of partisan jockeying over raising the debt ceiling comes at a time when the economic recovery seems to be taking hold, but is sufficiently fragile to be derailed by another display of partisan brinkmanship. The president alternates between demonizing Republicans and offering to negotiate with them (but not over cutting spending), and Republicans say they don’t want to shut down the government (unless they must in order to cut spending). Why Republicans think it is a good idea to cut spending further I leave to other economists to explain, and why the new improvement in voters’ view of the economy is not buoying the president’s popularity or shifting some of is best explained by Karlyn Bowman, the AEI’s poll-interpreter and in my view, in which I am not alone, the best in Washington. She points out that although there is some good news about the economy, “In most people’s minds the recovery is tentative and weak. So no kudos for Obama.”
Meanwhile, in the real economy:
· Last month auto sales were at their highest level since November 2007.
· New home sales in June increased 8.3 percent, and the inventory of new homes relative to sales is at its post-recession low. The composite index of present and future sales, and of prospective buyer traffic now stands at its highest level since 2006, which Goldman Sachs’ economists see as “a favorable indicator for future housing activity… despite the [recent] substantial increase in mortgage rates.”
· The New York and Philadelphia Fed indexes of economic activity both jumped in June “pointing to a better manufacturing outlook,” according to Peter Boockvar, chief market analyst at the Lindsey Group. The Richmond index fell, but it is regarded as less consequential than either the New York or Philadelphia measures.
· The increase in average hourly earnings has exceeded the inflation rate for eight consecutive months, giving a bit of a lift to consumer buying power.
· Household debt is down to 2003 levels and corporate debt is below pre-bubble levels, giving companies plenty of spending power when business confidence returns.
· America is in the midst of an oil and gas boom that is creating jobs now, and lower energy costs in the future.
· The nation’s fiscal house is in better order than in a long time, a consequence of tax increases that Republicans opposed and spending cuts that have Democrats up in arms.
This is not to say that all is for the best in what is probably the best of the world’s major economies. Retail sales are weak, as are corporate revenues, and analysts fear that a bruising battle over the debt ceiling will keep businesses on the side-lines.
Most forecasters expect forthcoming figures to support the popular perception of a recovering but still very weak economy, one that grew at the pallid rate of less than 2 percent this past quarter. We will know more when new jobs data are released on Friday.
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