[E] A Tale of Two Economies and a Failed Government

Dear Friends,

While Congress and the President were wasting their time talking about deficits and the debt ceiling, the economy continued to slow.  It is basic economics that you cannot cut your way to growth.  For reasons that completely escape me, President Obama and his advisers seem to have forgotten that fact.  Why would they focus on big cuts in Federal spending?  Now we have a deal that will be a disaster for all but the best off Americans.

"Consumer Spending Drops for First Time in Nearly Two Years" is the title of an article at MoneyNews.com (here).  The first four paragraphs tell it all.

Americans cut back on their spending in June for the first time in nearly two years and their incomes grew by the smallest amount in nine months, a troubling sign for an economy that is barely growing.
Consumer spending dropped 0.2 percent in June, the Commerce Department said Tuesday. Some of the decline was caused by declining food and energy prices, which had spiked in recent months. When excluding spending on those items, consumer spending was flat.
Incomes rose 0.1 percent, the weakest growth since September. Many people are responding by saving more. The personal savings rate rose to 5.4 percent of after-tax incomes, the highest level since August 2010.
The data confirmed last week's report that showed the economy expanded at a tepid annual rate of 1.3 percent in the spring after only 0.4 percent growth in the first three months of the year. But it also highlighted that consumer spending weakened during the April-June quarter, which could mean the sluggish economy is worsening.

There is a great article at Time Moneyland entitled "Things are Bad Unless You"re Amazon, Starbucks or Expedia" (here).   The author, Zachary Karabell, points out how well some of the companies that you would expect to be suffering in a slow economy are doing.  He concludes that there is not a single economy and that different people will feel the economy in entirely different ways.

Juxtapose these results [great earnings for Amazon,etc.] with the just-released second quarter GDP report showing that overall consumer spending contracted by 0.1%. Clearly, these companies and hundreds of others are serving a consumer that is not being impacted by the combined effects of unemployment, foreclosures and debt that have so weighed on the nation. More important is that these consumers are likely to keep spending and shifting their spending toward online, affordable luxuries and new ways of conducting old business regardless of whether Washington manages to steer us away from recession or not.
For sure, another global economic meltdown, whether triggered by Washington gridlock on debt (which finally appears to have been broken) or an entirely unexpected event, would have a negative impact on everyone. But barring that, the results of these companies demonstrate emphatically that there is no single economy — no one story that fits all consumers. Our national data, however useful at times, fails to capture just how rich and complicated is the tapestry of economic activity, even in trying times.

I am afraid that our country has lost any sense of community.  Led by the Tea Party Republicans and other (but not all) conservatives and with President Obama playing a supporting role, the conversation in this country has forgotten the poor, those on the fringes of society, those that cannot fend for themselves, those without political clout and anybody who is "other" and therefore not "American".  I don't know who said if first, but Hubert Humphrey was right when he said:

It was once said that the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped.

All the politics of the last several months have demonstrated that our political leaders and politicians have forgotten why government is important.  Our government is certainly failing Hubert Humphrey's moral test.

Thanks for reading and please comment,
The Unabashed Liberal