By Caroline Baum
The president's aides made the rounds of the Sunday talk shows this week and gave us a taste of the Democratic talking points for the 2012 election. Asked why, in the face of almost $1 trillion in stimulus spending, the U.S. economy stalled out in the first half of the year -- real GDP growth averaged 0.85 percent -- administration officials fell back on that old standby, "uncertainty."
On "Fox News Sunday," Gene Sperling, director of the president's economic council, attributed the economy's malaise to the "cloud of uncertainty" created by the threat of default.
Over on NBC, Obama senior adviser David Plouffe said the "debt-ceiling cloud has harmed our economy."
In what way? President Barack Obama told us last week that most people outside of Washington had never heard the term "debt ceiling" before.
They need to find a better excuse. Uncertainty is here to stay.
In any case, it's hard to blame a year's worth of high unemployment and tepid growth on the debt-ceiling debate. It was only last quarter that orders for nondefense capital goods excluding aircraft, a barometer of business spending, rose an annualized 17.5 percent. Only as the Aug. 2 debt-ceiling deadline approached did business focus on Washington theatrics.
A comment from transportation equipment manufacturers in Monday's ISM report for July bears this out: "The looming debt ceiling has government agencies backing away from spending. Forecasting a slowdown in demand in the short term."
The key phrase there is "in the short term."
The debt-ceiling cloud of uncertainty will drift by shortly after the vote to increase it by $2.1 trillion. It will be replaced by other uncertainties, including the prospect of coming up with an additional $1.5 trillion of deficit savings over 10 years -- on top of the almost $1 trillion that's part of the package.
Life is full of uncertainty, which right now is a euphemism for a lousy outlook. (Funny how uncertainty always seems to vanish in good times.) More damaging to the U.S. economy is the hangover from a multidecade debt binge. Both the federal government and the household sector need to pull in their horns. That certainty trumps any uncertainty out there.
-0- Aug/02/2011 15:18 GMT