Early signs that America’s gloom is lifting

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By Clive Crook

Published: December 19 2010

US business leaders are feeling more cheerful lately, and with reason. Last week’s tax deal is a fillip – not because it provides stimulus on the scale its proponents and critics say, but because it avoids an inadvertent tightening of policy that could have strangled the economy just as it was starting to revive. Other economic news has been good too. Cautious optimism is on the rise.

The revenue cost of the tax deal is more than $800bn over the next two years, prompting commentators to call it an even bigger stimulus than the fiscal plan adopted in 2009. This is nonsense. Almost all of the forgone revenue is due to the extension of tax rates and other measures already in place. Measured against a current-policy baseline, which is the only one that counts, the net new stimulus of the largest components is zero. The deal’s main innovation – and it is a good one – is the one-year payroll-tax cut, which costs something over $100bn in 2011.

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Politically, Mr Obama gambled in negotiating a deal with Republicans, but it worked. Democrats rent their garments and threw themselves from rooftops over his manoeuvres – “shameless capitulation” was one of the milder criticisms.

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For the sixth consecutive week, new jobless claims are down and stand at their lowest level since the summer of 2008. Most analysts expect the December employment report, due early next month, to make much better reading than November’s, which showed a rise in payrolls of less than 40,000 – consistent with rising, not falling, unemployment.

Housebuilding also shows signs of reviving. New housing starts rose 3.9 per cent in November, and new construction of single-family homes rose to a six-month high.

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Consumer deleveraging – intimately connected with the housing market – continues and is probably the biggest risk confronting the economy.

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Consumer confidence is slowly rising. The Conference Board index improved in October and again last month.

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The beginnings of detente between the Obama administration and US business are another good sign.

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The Democrats’ recent thrashing at the polls obliges the president to make a new start whether he likes it or not. This could go either way – productive compromise with Republicans on tax reform, entitlement reform and long-term deficit reduction; or confidence-killing paralysis. For now, score it as one more reason for optimism.

http://www.ft.com/cms/s/0/865291dc-0b99-11e0-a313-00144feabdc0.html#axzz18gaZZk90

[Danno 1,228]

I'm still waiting for the "Summer of recovery" to start.

[DEDixon 39]

i see signs of america being a 3rd world country. i'm convince it will happen. little by little, it is happening everyday.

[Danno 1,228]

i see signs of america being a 3rd world country. i'm convince it will happen. little by little, it is happening everyday.

Sum truth to that.

[Sofiyya 1,687]

I'm having fun

[james&olya 1,121]

i see signs of america being a 3rd world country. i'm convince it will happen. little by little, it is happening everyday.

I agree. It is simple, really. As the ultra-wealthy take home ever larger paychecks this doesn't come out of the incomes of the poor, it is taken from the middle class. The middle class is headed down and if the trend continues we will eventually be a 3rd world economy. The 'American dream' will be gone for all but the plutocrats. Call it class warfare if you want but if you think it has not been already going on for many years you are blind. I will give the ultra-wealthy credit, though, for making the middle class fear the poor while in fact, it is the ultra-wealthy that are the biggest threat to the people in the middle. Getting the working poor to join this absurd 'tea-party' movement that is only a tool of the plutocrats must have them laughing all the way to the bank!

[Bad_Daddy 2,209]

i see signs of america being a 3rd world country. i'm convince it will happen. little by little, it is happening everyday.

Agreed.

[BishopM 114]

i see signs of america being a 3rd world country. i'm convince it will happen. little by little, it is happening everyday.

From my travels, I'm thoroughly convinced that the USA is losing group to emerging countries. But, what really distresses me is that the USA general populace doesn't seem to recognize it! I spend a fair amount of time telling my son (college sophomore) that his professional life is going to be much different/more competitive (globally) than my professional career has been. Of course, he's not traveled internationally so he can't really see it either...so I don't know if I'm reaching him or not.

I don't know if this means that we'll become a 3rd world country (that would be extreme) but it has led me to believe that the USA won't be the world's super power at all....