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Politics as Usual? Stimulus Needs to Come From Public, Too
The beat goes on, the beat goes on. Unfortunately, the drumbeat pounding the rhythm to the brain is not soothing.
As the data continue to pour in, the picture of an economy in crisis becomes clearer. Jobs are being lost at an extraordinary pace, the unemployment rate is rising sharply, and confidence remains at lows not seen before. Into the mess rode President Obama and Congress. Proposals for change were thrown around, but it isn't clear that we are getting what we need.
What we didn't need was the continued nasty noises that only Washington politics could create.
That the economy continues to deteriorate further was driven home by the loss of nearly 600,000 jobs in January. Just about every sector of the economy posted declines in payrolls, with gains once again seen only in education and health care. The unemployment rate surged to 7.6 percent -- the highest rate since the deep recession in 1982. In just three months, firms have let go nearly 1.8 million workers.
The shocking cuts have made it clear that firms have adopted a bunker mentality. Survival has become the order of the day, and reducing costs is the primary strategy. Executives are not waiting, and they are not approaching the problem slowly and cautiously. Instead, they are trying to shrink their labor expenses now so they can ride out the storm.
About the only glimmer of hope in the data was the possibility that with so many companies laying off workers, the adjustment process will be shortened and the job losses will slow sooner than might be expected. That remains only a possibility, though.
Obama and his economic advisers moved quickly to try to pass a fiscal stimulus bill. Unfortunately, Washington politics took hold, and the rancor that we all hoped would be limited flared up once again. Politics and political philosophy replaced economic reality, and lines were drawn and the pitchforks were sharpened.
Ultimately, the stimulus bill is a compromise plan. In this case, the need for immediate stimulus that would jump-start the economy will be supplemented with tax cuts and spending programs that likely will not affect the economy before the end of this year at the earliest and, in many cases, not until next year.
Although many of those ideas are nice, the problem is now. What is disconcerting about the debate is not that politicians have different views of what is good economic policy; that is normal. It's the tone.
Really, it's up to the private sector -- businesses and households -- to take over to create a lasting recovery. The fiscal stimulus bill is supposed to create not only new spending and demand, but is also expected to bolster confidence that we could get out of this mess.
Let's hope the Washington negativity doesn't overcome the great potential to get things going, which in the end is what we all need right now.
Joel L. Naroff, Ph.D., is chief economist for TD Bank. He can be reached at 215-497-9050.