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Moody’s Analytics this week significantly lowered its expectations for economic growth for the rest of the year, citing an “extraordinary reversal of fortune.” Whereas the company expected the economy to grow at 3.5% in the latter half of 2011, Moody’s now sees GDP growth closer to 2%.
The Philadelphia Fed index, a closely-watched metric for factory activity, was atrocious this morning; existing home sales dropped unexpectedly; and first-time unemployment claims have taken a turn for the worse.
Morgan Stanley, meanwhile, cut its global growth forecast for the next year by a full percentage point. It cited “a policy-induced slowdown,” aggravated in part by “the prospect of fiscal tightening” in the United States and Europe.
Ezra Klein explained:
In other words: Growth is weak and policymakers are hurting rather than helping. The debt-ceiling debate hurt. The dithering response to the Eurozone’s debt crisis hurt. And the expected austerity in both the United States and Europe is going to hurt even more. JP Morgan notes that one reason they think the United States might tip back into recession is that in the first quarter of 2012, there will be “an automatic tightening fiscal policy if, as our US team currently assumes, this year’s fiscal stimulus measures will expire.”
The economy may very well be slipping back into a recession, but it’s within our power to prevent this. Too many policymakers simply don’t want to. We’re headed for a cliff, but there’s plenty of time to hit the brake and turn the wheel. Conservatives simply refuse. Their ideology demands it.
We are talking about a rare sight: a recession conservative politicians are causing through neglect, ignorance, and fealty to a misguided philosophy.
Wall Street is effectively pointing at a downturn. Republicans, who’ve been wrong about every economic challenge of the last quarter-century, are practically aiming for the disaster Wall Street is telling them to avoid.
Josh Marshall added, “It really is a downturn made in Washington. Mind-numbing to behold. But then, who hires Washington?”
Update: In case this isn’t already clear, the rules of supply and demand still exist, and the economy is lacking demand. Democrats prefer to make more public investments, which boost demand and inject capital into the economy. Republicans prefer austerity, which lowers demand and takes money out of the economy. Every time you hear some GOP politician say, “What we need right now is to cut spending,” he or she is effectively begging for an even weaker economy.
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stormskies on August 18, 2011 12:40 PM:
And who continues to vote for these Repiglicans ? About half of our population ....
mdk on August 18, 2011 12:41 PM:
This is where commentators like Josh and Ezra (in his similar post this morning) need to be very, very, very clear. This is not "Washington" (Josh) and it is not "Congress" (Ezra) who is causing this problem. It is the Republican party in control of the House and in a position to be obstructionists in the Senate. Period. Full-stop. The more respected left-leaning observers like Ezra and Josh use the "Washington" is bad, or "Congress" can't get it done phraseology, we difuse blame away from where it squarely belongs and contribute to the confusion of less-politically astute observers.
Lay blame where it belongs, folks. Time for nice generalities is over.
T2 on August 18, 2011 12:44 PM:
GOP/TP want the economy to suck so Obama won't get re-elected. They want their failed policies to continue.
c u n d gulag on August 18, 2011 12:48 PM:
Wait, what did you say?
I can't hear you for all of the screaming, cheering, and shouting from the Republican side!
They love the smell of recession in the morning.
It... it smells like... VICTORY!' *
* Paraphrased from the aptly named, but decades too soon, "Apocolypse Now!"
c u n d gulag on August 18, 2011 12:49 PM:
Wait, the Republicans have broken out in "UNHAPPY DAYS ARE HERE AGAIN!"
1st Paradox on August 18, 2011 12:50 PM:
Seconding T2, it's not "fealty to a misguided philosophy," it's a genuine interest in hurting the country so they can blame the President. The misdirecting "philosophy" is designed to give them the cover of supposed integrity and good intentions.
PTate in MN on August 18, 2011 12:56 PM:
Let me build on mdk's comment. And we need to lay blame not just on Republicans but on their specific policies and philosophy. After 30 years of this diseased Republican ideology, the toxins have spread throughout the body politic. To the extend that low-information voters parrot conservative ideology such as "smaller government is better,"redistribution of wealth is wrong" or "we can't afford it. The government needs to live within its means," they are demonstrating that they don't have a clue what ails them.
Gregory on August 18, 2011 1:04 PM:
Republicans, who�ve been wrong about every economic challenge of the last quarter-century
Oh, come on, Steve -- the Great Depression was longer ago than that.
And who continues to vote for these Repiglicans ? About half of our population
But the so-called "liberal media" won't make clear that the economic slowdown -- like the Great Recession before it -- is a direct and predictable result of Republican economic policies. Instead they'll fall back on their usual, lazy "he-said-she-said" reporting and let Republicans blame the bad economy on regulation and high taxes (while conveniently failing to mention that Republicans oppose economic aid measures they once faovired and are on record as wanting Obama to be a one-term president).
There's enough objective evidence to conclude that Republicans are hurting the economy not only due to their supply-side economic fantasies but also deliberately, in hopes Obama will get the blame. It's past time the Republican Party was held accountable for its destructive hyper-partisanship -- and no, when it comes to wrecking the economy on purpose, both sides don't do it.
Ron Byers on August 18, 2011 1:05 PM:
Rick Perry said it all when he said that any efforts by the Fed to help the economy before the election would be treasonous. After his election, I am sure Rick would be anxious for the Fed to act.
The misguided philosophy at work has nothing to do with Hoover economics, it has everything to do with Party over Nation. The Republicans are traitors to their country. Full stop, end of story.
Ron E. on August 18, 2011 1:07 PM:
It's not (primarily) ideology that is making Republicans oppose efforts to grow the economy. It's political self-interest. A bad economy is their only chance to defeat Obama. If a Republican were President right now, they'd be scampering to pass trillions in new tax cuts for the rich (with a few scraps for everybody else) to stimulate growth.
Ron Byers on August 18, 2011 1:10 PM:
Everybody realizes that we haven't had any real austerity yet. So far Obama and the Democrats have been able to head off really draconian policies that would actively hurt the economy. The Republicans have only been able to stop the President from doing anything positive to help the economy. I shutter to think how bad things would be if Republicans were able to actually impose their entire job killing agenda on America.
kevo on August 18, 2011 1:11 PM:
Demand Therapy is what our ailing economy needs!
Whereas, I need to demand therapy for each and everyone of our Republican Congress Critters who are actively seeking the demise of our nation so they can kick that guy they despise out of the WH! -Kevo
Mike on August 18, 2011 1:20 PM:
What? Listen to any Obama speech (and watch his behavior). It's all deficits, cut spending and, .... oh yeah, some (minor) "jobs" program.
DAY on August 18, 2011 1:21 PM:
For a cold slap in the face by reality, go down to the old folks home, and mine the memories of some of the residents over the age of 90, (b. 1921, grew up in the depression).
And then go home, plant a garden, pay down your debts, and put on your waders- because, as Pete Seeger sang, we're about to be "waist deep in the Big Muddy."
tank on August 18, 2011 1:24 PM:
On November, 1st, 2010 in the late evening at 22.42 the British parliament becomes the witness of very strange performance of lord James of a baron
Blekhitsky which essence was reduced to that he tried to inform members of chamber of lords the fact of existence of a certain strange organization
which wishes to give the huge sum of money for restoration of economy of Great Britain and which it in the performance called as "Fund X".
http://www.youtube.com/watch?v=Slffv8EVoAA
June on August 18, 2011 1:28 PM:
@Mike - not true. Even if you were to only listen to the last two or three months of "Your Weekly Address," you will hear just the opposite from the Prez; yes, the GOP forced the topic of deficits, etc. to be front-and-center through the whole debt-ceiling-hostage situation; however, Obama has never stopped advocating for jobs intiatives, programs, investment and legislation. And not on a "minor" scale either.
Ron Byers on August 18, 2011 1:30 PM:
Ron E. What we have to do is make sure the Republicans reevaluate their political self interest. We do that by hanging the coming double dip right around their necks.
r on August 18, 2011 1:33 PM:
And who has bought into the R's terms? Obama. Has spent more time in the past year talking about deficits than growth.
sparky on August 18, 2011 1:34 PM:
History is filled with examples of nations that fell violently when the distribution of wealth reached a tipping point. No nation ever fell because of a prosperous middle class. If the republican economic is ever fully implemented the United States will become of a nation of unemployed, educated people without healthcare, housing, or even food. And they'll be armed. At that point a minor adjustment to the status quo will not be enough to satisfy their rage.
Josef K on August 18, 2011 1:45 PM:
And we're supposed to be the 'dominant species' on this planet, yet we have to claim Michelle Bachmann and Rick Perry.
Haystack Calhoun on August 18, 2011 1:45 PM:
But then, who hires Washington?
Why, the American people!
Smarter voters, please.
Brenna on August 18, 2011 1:56 PM:
Obama has perpetrated the 'cutting is good' myth. For crying out loud, the republicans don't really believe this. Like others said, they just want to see the economy suffer.
Obama constantly touts a mixed message. I'm so confused about what he believes in, what he stands for. I'm up, I'm down. He's an enigma and I'm getting really tired of his wishy-washy agenda.
This is no way to run a country.
steve duncan on August 18, 2011 1:58 PM:
If a guys hires you for a job, hands you a knife, and insists either you cut off his hand or he'll replace you with someone that will, what do you do? Oh, this is a job you fought to get for many months, if not years, and spent millions in the process seeking it. Maybe you just cut off his hand like he asked.
Americans elect people, then insist those people screw them over. All the people on the back yard porch that Perry told printing more money was a terrible idea? They clapped loudly at his proclamation. He could have said "We're gonna throw all the niggers and spics overboard!" and they'd have clapped loudly. Hell, the crowd could have been nothing but "niggers and spics" and they'd have clapped loudly. Give a rich white guy a microphone and a stage and he'll make the Pied Piper look an amateur. You get the representation you deserve. Americans vote for turds like Perry and the resulting carnage is well earned.
jdog on August 18, 2011 1:59 PM:
A "recession conservative" might be a good characterization of Republican politics. Focus group, anyone?
Equal Opportunity Cynic on August 18, 2011 2:06 PM:
And who continues to vote for these Repiglicans ? About half of our population ....
With 2010 turnout % somewhere between 30s and 50s, you're saying that the GOP basically threw a shutout. Virtually every single voter who showed up voted Republican. That's amazing!
http://elections.gmu.edu/Turnout_2010G.html
filkertom on August 18, 2011 2:06 PM:
Steve, you're almost there. Yes, we have lower demand. Why? Because consumers do not have money.
Everyone has been nickel-dimed, then dollar-fived, then health-care-mortgaged and otherwise bludgeoned into taking shallow breaths and hoping they can both eat and keep the lights on, we'll worry about rent later. Our moronic overlords have forgotten what Henry Ford (hardly the greatest role model of socialism) knew damn near a century ago: To sell his products to his employees, he had to pay them living wages.
Wall Street rewards companies for maximizing profits by breaking union contracts, buying other companies and laying off a good hunk of their work force, and increasing "productivity" (which basically means making an employee do the work of more than one employee), and then freaks when the number of unemployed goes up. Between that and their shrieks of terror and relief with the minute-by-minute stock exchange reports, it's as if they have the attention span of ferrets on mocha latte.
Economic advisers used to counsel slow, steady growth, and making sure all your infrastructures were in place and up to date. That seems to have gone completely out the window, and the past fifteen years have been the result.
If the moneyed elite and their congressional toads weren't scrambling for every damn penny they could get, they'd maybe realize that.
Equal Opportunity Cynic on August 18, 2011 2:08 PM:
[Republicans] love the smell of recession in the morning.
It... it smells like... VICTORY!' *
Not if the polls suggesting that the public is blaming the GOP have any credence. Still a long time until November 2012 of course.
bdop4 on August 18, 2011 2:12 PM:
"yes, the GOP forced the topic of deficits, etc. to be front-and-center through the whole debt-ceiling-hostage situation." - June
Right. Obama and Democratic Party were POWERLESS to fight the conservative deficit reduction juggernaut. They had NO CHOICE but to propose even bigger spending cuts a la the "grand bargain," or they would have been politically destroyed.
What utter crap. From Day 1, they should have vigorously opposed the deficit reduction argument, and argued that austerity in this economic climate does nothing but hurt the economy.
They should have rejected the whole debt ceiling hostage taking as exactly that, and not reinforced the "debt reduction as priority one" mantra that has pervaded political discourse these past six months.
But even today, a big part of Obama's "solution" involves large spending cuts beginning in 2013, well before the economy has had any chance to recover.
Only when the economy is expanding can we start thinking about debt reduction. We need every single dollar to be directed towards reducing unemployment and reviving the economy, but we can't do that because Dems needlessly hamstrung themselves by AGREEING that deficit reduction should be a current priority, when in fact it is an issue that will be more easily resolved with a healthy economy.
JOBS FIRST, and the debt will take care of itself.
bob h on August 18, 2011 2:16 PM:
What is even sicker about it all is that Wall St. bankrolled big time the Republicans who are demanding policy measures that will trash Wall St. itself.
Anonymous on August 18, 2011 2:19 PM:
"And who continues to vote for these Repiglicans ? About half of our population .... "
Actually, this is wrong. It may be fair to say 'about half of those who vote', but it is important to remember that our voter turnout is still pathetic.
In 2010, there were a little more than 218 million eligible voters. The sum of all votes for Republican House candidates was a little less than 45.6 million. That's only about 20.5%, and no where near half.
John B. on August 18, 2011 2:30 PM:
"Every time you hear some GOP politician say, 'What we need right now is to cut spending,' he or she is effectively begging for an even weaker economy."
-- Steve Benen
Absolutely correct. But what was the message Obama himself delivered to the people? He wants to impose cuts that will lead to 'an even weaker economy.'"
From this year's SOU speech:
"So tonight, I am proposing that starting this year, we freeze annual domestic spending for the next five years. Now, this would reduce the deficit by more than $400 billion over the next decade, and will bring discretionary spending to the lowest share of our economy since Dwight Eisenhower was President.
This freeze will require painful cuts. Already, we've frozen the salaries of hardworking federal employees for the next two years. I've proposed cuts to things I care deeply about, like community action programs. The Secretary of Defense has also agreed to cut tens of billions of dollars in spending that he and his generals believe our military can do without."
As another commentator writes, above: "Obama constantly touts a mixed message. I'm so confused about what he believes in, what he stands for. I'm up, I'm down. He's an enigma and I'm getting really tired of his wishy-washy agenda. This is no way to run a country."
Absolutely correct. And
Sam on August 18, 2011 2:35 PM:
bob h - That's the crazy part. Corporate groups and Wall Street spent all this money on candidates in 2010 who actively campaigned on policies that would destroy their business. I watch Bloomberg TV alot and all these Wall Street bankers and analysts are now saying we need more fiscal stimulus right now and we should avoid aggressive debt reduction in the short-term. Were they even paying attention to what the GOP campaigned on?
bob h on August 18, 2011 2:42 PM:
Sam- Yes, they were so desperate to void Dodd-Frank and so upset that Obama had "vilified" them that they gave to the Party whose policies will put a lot of Wall Streeters on the streets. The dismaying story today is the unbelievable shallowness of our business elites.
JB on August 18, 2011 2:53 PM:
Anyone in the mood to truly propose a deal yet? I'm not talking about "we agree to all spending cuts and no tax increases" or some "balanced approach" that calls for defense spending cuts and tax increases, but no changes to Social Security or Medicare. Say, let's get serious about stimulus. You (Republicans) agree to the jobs program, in which we spend trillions more on infrastructure, research, building new aircraft carriers and other military equipment, tax credits for hiring American workers, space exploration, etc. In return, we (Democrats) agree to roll back regulations on business, allowing, for instance, fast-tracked oil and gas drilling, fast-tracked environmental reviews of new private and public construction projects and suspension of the implementation of EPA regulations pertaining to carbon dioxide emissions.
Gotta tell you, such a proposal would splinter the right wing/business coalition. It would carry the day in Congress, Tea Party be damned.
How about it?
Sidwell on August 18, 2011 3:17 PM:
Please remember the words of Debbie Wasserman...
Texas Aggie on August 18, 2011 5:52 PM:
There was an article yesterday about where in the US jobs are actually increasing and the economy is doing well. It is the primarily Caucasian areas of Washington, D.C. Everywhere else in the country, including the mainly AfricanAmerican areas of Washington, DC, are doing poorly. This may explain why Congress doesn't believe that there is a problem.
John D. Froelich on August 18, 2011 7:11 PM:
The major error is discounting the economic drag from both the debt and the dying welare state.
disgusted by the elites on August 18, 2011 7:12 PM:
you have to be kidding me.. "In case this isn’t already clear, the rules of supply and demand still exist, and the economy is lacking demand. Democrats prefer to make more public investments, which boost demand and inject capital into the economy. Republicans prefer austerity, which lowers demand and takes money out of the economy. Every time you hear some GOP politician say, “What we need right now is to cut spending,” he or she is effectively begging for an even weaker economy."
you the stimulus.. and it was big and it did NOTHING..
You have reagan;s example.. and it worked..
so let's now try cutting tax rates. and yes cutting SPENDING!! what do you think got the PIGGS in trouble. it's going to hurt.. of course. we maxed our cards out. and over regulated the economy. What did libs think.. oh we can do anything we want and the economy will just grow and grow and grow.. It does not work that way. never did. and unfortunately teh world is global now. and if a country is willing to give a company english speakers at a cheap rate tehy will take it. look at apple microsoft.. most of it is made else where and symbolically put together here.
even car parts are made outside of the USA and the cars are symbolically put together here.
WAKE UP!
that is why this administration is so shell shocked.. they beleived a growing economy is a given, short recessions are a given.. WRONG they are not!
Bruce K on August 18, 2011 7:45 PM:
I totally get that Repubs want to push austerity precisely BECAUSE it hurts the economy on Obama's watch. But what I don't get is how the presidential candidates expect to govern if one of them wins. It will be their economy, so will they still be anti-Keynesians when they stand to benefit from POSITIVE results?
NovaCRE on August 18, 2011 9:03 PM:
Its funny to hear people to say that "Obama's policies destroyed the economy" when it was a mess when he took office, regained strength to grow at 3% for several quarters largely based on his stimulus which created or saved 1.8 million jobs (per CBO), then promptly tanked when a rather radical group of republicans gained control of the house, effectively ending any prospects for additional stimulus. While I am not inclined to argue that the GOP's takeover of the house is solely responsible for our slipping back into recession, although there lack of economy literacy is not helping, anyone who blames Obama's policies caused the mess we are in needs to get back in touch with reality.
Tea Party Jim on August 18, 2011 9:14 PM:
Poor Obama.
Poor Dismocrats.
Poor Reid.
Poor Pelosi.
Why didn't they do something when they had all the marbles.....oh, wait, they did, didn't they....flushed the whole economy down the toilet.
Poor USA....today.
You are so silly, Mr. Benen. Get your blinders off.
Doug on August 18, 2011 9:18 PM:
re disgusted by the elites @ 7:12 PM:
"you(sic) the stimulus.. and it was big and it did NOTHING.."
Wrong. The stimulus bill legislation contained provisions for approxiamtely $500 billion in spending and $300 billion in tax cuts. The stimulus stopped the Bush Recession from becoming another Great Depression. Unfortunately, instead of 1/3 tax cuts, the ENTIRE stimulus should have been spending. As it was, we got a charge on the national credit card for $800 billion dollars, but 1/3 of it was wasted on substandard economics.
"you have reagan;s(sic) example.. and it worked.."
Of course it did, he raised taxes at least five times during his presidency. And then put another $2 trillion on the national credit card. Naturally the economy boomed.
"so let's now try cutting tax rates."
Where HAVE you been for the past forty years? Marginal tax rates were 70% under Nixon. Reagan reduced them to 50% and then did away with them. Since then the effective tax rate for those making over $1 million per year is usually less than 25%, sometimes less than 20%. By the way, I make around $35,000 and pay about 20% (state and Federal).
"we maxed our cards out."
WE? Try Reagan, GHW Bush and GW Bush. They added nearly $10 trillion to the National Debt. Under the last fiscally responsible administration, before THIS one of course, President Clinton produced a SURPLUS, with a projection of being able to pay off the National Debt within a decade. Unfortunately, that decade included the Presidency of GW Bush...
"and over regulated the economy."
Are you referring to those "regulations" that prevented various Wall Street firms from bundling subprime mortagages, acquired from PRIVATE banking establishments, selling said junk and then trying to act innocent when the bottom fell out of THEIR Ponzi scheme?
THOSE regulations?
Economically we ignored the world during the Great Depression and, if necessary could do so again. I don't think that's needed, though. What IS needed is to return to the tax rates in effect under the last honest Republican President, Dwight Eisenhower.
I'm game. Are you?
yellowdog on August 18, 2011 9:59 PM:
@bdop4 "JOBS FIRST, and the debt will take care of itself."
Well, the first part is right. The second part, not so much. There's no way "the debt will take care of itself." That is not realistic, no matter what astounding level of economic growth occurs in the next few years.
Obama is trying to thread a needle - find ways to boost the jobs picture and stir economic growth now, but take seriously the major deficit issue that looms. It is not an either/or picture: We have to deal with lack of jobs now AND the deficits to come. I realize that makes exactly no one happy, but that is the reality we face. We can put off the deficit issue a little while, but not indefinitely. It's not going away, and we aren't going to magically grow our way out of it.
The President gets pilloried every time he mentions debt and deficits. Do you think there might be a reason those issues are on his mind? Assume, just for sake of argument, that it is not because he is weak and caves to GOP talking points. Look beyond that charge. What other explanations exist?
JohnR22 on August 19, 2011 10:13 AM:
Wow. This is rich. Leftists accusing Repubs of destroying everything by blindly following their ideology.
It's the Left whose economic and social ideology is like a fundamentalist religion. After all we've been through, their only solution is to spend even more...and add it directly to the national debt. Man, there's a solution for success...like an alcoholic trying to binge drink himself to sobriety.
Cutting spending will hurt in the short term as it will negatively impact demand. But...it's a necessary pre-condition to getting our financial house in order. Like the person who has been on a credit card binge, it hurts when you have to go cold turkey; all manner of goodies you must give up. But it's a necessary first step.
Robb on August 19, 2011 10:33 AM:
It is painful to read both the article and the comments. How very silly you are.
To claim that we Republicans want the economy to fail is as ridiculous as the claims in 2007, that Dem's wanted the economy to tank.
The fact is there are at least 2 very different visions to accomplish the same thing - economic prosperity.
Personally, I think it is difficult to argue against a low-tax, small-government approach.
But it is follish to turn that arguement into a Good versus Evil discussion.