Locally and nationally, the economy is slowly recovering from the recession. The greatest risk now is that ideologues in Congress will mess it up.
The U.S. economy added 155,000 jobs in December, enough to absorb new entrants to the workforce but not enough to significantly lower the 7.8-percent unemployment rate. The economy has been adding about 150,000 jobs a month the last two years.
The recession from which America is recovering was global, and the big question is why we are doing as well as we are. Other countries, especially in Europe, are in much worse shape. The answer to that question is painfully simple: Despite economic advice warning against it, other countries reacted to recession-triggered drops in revenue with large spending cuts.
The United States initially reacted to the recession in the right way, with a stimulus. By the time officials figured out the size of the stimulus was only enough to stall — not reverse — the downturn, Congress was cluttered with ideologues whose sole mission was to shrink the size of government.
Had the same crop of politicians come to Washington at a different time, they would not have caused damage. Battles over the size of the federal government are not new, and during times of growth the private sector is not harmed by a reduction in federal spending. Beginning in 2008, though, the private sector was reeling. Consumer demand dropped to historic lows, manufacturers and retailers reacted by laying off workers, and the worst recession since the Great Depression raged.
Congress continues to ignore history lessons from the Great Depression and contemporary lessons from Europe. The major contributor to the deficit is the struggling economy. If the main goal is to reduce the deficit, the first step should be spending aimed at increasing demand. Once the private sector recovers, tax revenue will increase and welfare expenses will fall, shrinking the deficit.
America needs to reduce its perilous debt level, but it is counterproductive to do so with spending cuts while the economy is struggling.
Despite the lessons of history and Europe, the GOP-controlled House has signaled its determination to slash spending. It is so convinced of the wisdom of its timing that several members are threatening to default on existing U.S. obligations, rather than delay spending battles until after the economy recovers.
If Americans want to reduce the size of government, elected officials should seek to do so. They should have the wisdom, however, to do so when their actions will not damage the economy and leave even more of their constituents without jobs.