The officialdom has moved on to a new form of theater, namely legislative mud wrestling, which serves as a useful distraction from the failure to deliver on what ought to have been the first order of business, namely reining in the financiers. As we’ve said repeatedly, cleaning up the banking system is a necessary precursor for recovery from a serious financial crisis. Instead, whether by dumb luck or design, enough Americans have become fixated with various forms of jealousy over advantages they believe their neighbors have (whether accurate or not) that it is providing a great smokescreen for the oligarchs to continue their looting.
The fact that the economy has moved up up from a serious trough is hailed as a recovery. But to the vast majority of Americans, the talk of better times rings hollow. The top echelons are back to spending smartly, and Wall Street bonuses for 2009 and 2010 were lavish.
But even though spending economy-wide perked up in December, some question whether it was savings fatigue rather than a return of consumerism. And while some have argued that the economy had entered sustainable recovery, federal fiscal stimulus is likely to be met if not exceeded by state and local budget cuts. And that’s before we see the impact of Eurozone wobbles and rising commodity prices, particularly if oil continues to rise thanks to widening turmoil in the Middle East.
Dave Dayen provides an apt description of the parallel universe in which policy decisions are being made:
Consider that Meet the Press managed to get through an entire show yesterday on the economy while mentioning jobs and unemployment exactly once, and you can see what I mean. Washington concerns aren’t being driven by outside agitators so much as by their penchant to cover up the misdeeds of elites. If we don’t address the financial system and their role in the crisis, if we don’t address the jobs crisis, then there’s really nowhere else to go to but the budget. And so we have this warped conversation where deficits stand in for economic growth and opportunity, despite all evidence to the contrary…
And yet, we basically have two parties who are fighting over the same patch of turf, both trying to claim the mantle of deficit reduction. Both parties speak about tax increases as if they were talking about syphillis. Democrats at least talk about job creation, but they haven’t infused it with any passion or sense of urgency. Democrats don’t have to co-opt the Tea Party, but they’re giving it a shot – and mainly to please donors in the next election, in my view, signaling to them that their businesses will not be disrupted and their untold riches are safe.
Contrast this with the latest report from the not-for-profit credit counseling agency CreditAbility. Its latest report (hat tip Doug Smith) shows that, contrary to media cheerleading, consumer conditions deteriorated in the fourth quarter of 2010. That means not only did conditions worsen during all of last year, but the standing of household budgets is at its worst level since the first quarter of 2010.
And Mark Cole, who is oversees the credit index, does not see reports of improved economic conditions translating into healthier consumer finances:
“Improved stock prices have increased the value of 401(k) and other investment accounts in the average US household, but high unemployment continues to stifle income growth, causing many homeowners to miss mortgage payments,” Cole said. “While an increase in consumer spending helped the economy in the fourth quarter, the index showed that an increasing number of people failed to prudently manage their household budgets. This lack of savings could cause financial problems if they need to rely on their savings in the future.”
Cole does note that households with stable and unimpaired incomes are beginning to spend more freely, but distress is becoming more acute for those whose cash flow has not recovered. And the number of people in the latter category is large enough to call the happy talk about the state of the economy into question.