How long can the media continue to be surprised by negative reports on the economy? And why are the rest of us not surprised?
Or is the media only feigning its surprise?
Now, I understand that this is the first quarter since the 2008 crash that the economy hasn’t grown at least a little tiny bit. And I understand that most economists had predicted at least modest growth this quarter. Thus, the “surprise” of the experts.
But I still don’t see why they’ve been so surprised. How could the economic climate be good with the uncertainty of the fiscal cliff negotiations, the debt ceiling fight, the very real problems of unemployment and the deficit and looming Obamacare and payroll tax raises for all (even if they’re technically the result of the end of a temporary cut)?
The proximate cause of this particular downturn is thought to be defense cuts, and some other indicators seem okay. But nothing looks what one might call good. And why, pray tell, would it?
I’ve made no secret of the fact that I’m no whiz on economics and/or finance. But my gut and my brain tell me that the economy is one of those complex creatures, subject to the law of unintended consequences and a host of other things we understand only poorly, if at all, and that predictions are inherently shaky, whether by learned economists, politicians, or little old me. But that anyone is truly surprised by the economy doing poorly at the moment is—well, it’s surprising.
As I see it, the situation is that we must balance our need to cut government spending and shrink the deficit with our need to stimulate growth, and because it’s a fact in recent years that a lot of our economy is dependent on government spending, these become contradictory impulses. We must create a climate where people believe things are getting better, because people’s economic behavior is in part psychological (I think Romney’s mere election would have helped create at least a bit more of that climate, but we’ll never know if that was correct, because we never got a chance to find out). We have to balance the need to raise revenue through taxes with the need to not burden people unduly and decrease their spending.
And on and on and forth. I also suspect that our current economy still has some not insignificant bubble aspects, propped up in part by the government in a sort of endless loop, rather than reflecting true vibrancy.
[NOTE: IF you want to read a ton of articles on what this 4th quarter report means, just go to memeorandum and start clicking.]