We Americans needed this weekend, with something to celebrate -- our independence from overseas oppressors. Indeed, the Tea Party movement is attempting to recapture the attitude of our nation’s founders toward overweening government, in this case our own. The distance from Washington to Main Street is not as great as that from Boston Harbor to the Palace of Westminster, but it is great indeed. Most Americans want to see spending reined in and taxes cut. But when the manager of a custard stand in Milwaukee suggested to Vice President Joe Biden that he would prefer lower taxes to payment for the desert he had just dished out, Biden told him not to be a “smartass.” That typifies the level of understanding the Obama administration, staffed largely with lifetime, risk-averse public-sector workers with little private-sector experience or exposure, has of struggling entrepreneurs. “Mr. Obama … does not understand business…. He is interested in economics and technology; but not in how you make money,” notes The Economist, a once- and-still supporter of the president.
A handful of moderate Democrats -- those from marginal districts -- are sufficiently responsive to their constituents’ aversion to more deficit spending to have joined Republicans to kill a second stimulus package. If they persist, government spending will slow, or at least it will grow at a slower pace. Meanwhile, consumers are in no mood to fill the spending gap: Incomes in May rose 0.4 percent but spending by only half that, as consumers prepared for the rainy day that seems increasingly inevitable. As is their wont, retailers blamed the weather: The hot and humid weather led consumers to buy only shorts and t-shirts, rather than summer dresses and suits. So they say.
That leaves cash-rich businesses as the source of demand that can propel the economy to a level of growth sufficient to reduce the ranks of the army of unemployed. But with an administration that sees businesses and the wealthy as milk cows, to be taxed and taxed, and increasing health care and energy costs as something businesses should gladly bear to fund the president’s “transformation” of America, job-creating businesses are battening down the hatches rather than setting sail on what the Supreme Court in another connection once called “a sea of doubt.”
Eighty percent of corporate finance executives responding to a survey by the Association for Financial Professionals say they expect to hold onto their record-high cash hoards or even expand them in the next six months. This despite the fact that the yield on cash held in bank accounts and other ultra-safe investments is close to nil.
All of this adds to Americans’ worries. And explains why we are happy to have a long weekend with no economic news, a barbecue afire in the backyard, or plenty of sports on the television screen, and a plethora of hit movies available to those who prefer urban pleasures to sandy beaches. The latter, of course, are not available to residents of states on the Gulf of Mexico, who hopelessly and gloomily watch oil wash ashore, and their tourist trade wash away.
They are not alone in their despondency. After three successive monthly increases, consumer confidence plunged in June, the biggest drop coming in the component measuring future expectations. Friday’s job report suggests that job-creation momentum is slowing, and sent forecasters scrambling to lower their growth projections. The unemployment rate fell from 9.7 percent in May to 9.5 percent in June, but that was because 652,000 workers found their prospects so bleak they dropped out of the labor force.
That was only the latest in an unremittingly gloomy flow of news. Sales of new homes dropped 33 percent in May to a record low, and sales of existing homes fell by 2.2 percent, falling short of economists’ predictions of a 6 percent rise. Even mortgage rates at a 40-year low could not offset the expiration of the tax credit for new home buyers. And the manufacturing sector, although still growing, is showing signs of cooling a bit. Lest ordinary folk --- aka the small people -- missed the import of all of this, Dennis Lockhart, president of the Atlanta Federal Reserve bank, and Jeffrey Lacker, a Fed governor, warned that the recovery is so weak that it might morph into a deflationary spiral -- consumers don’t buy expecting lower prices in the future.
Meanwhile, 1.3 million jobless workers have exhausted their unemployment benefits, a figure that will jump to 3.3 million if Congress can’t resolve the dispute about how to fund an extension of payments. Democrats want to borrow the money, adding to the deficit, while Republicans are demanding that the needed $34 billion come out of unspent funds from the first stimulus package. Unfortunately for workers whose benefits have expired, Congress deemed its Independence Day break more important than enabling millions of Americans to feed their families, and went home.
Throw in the news really close-to-home and from overseas. People living in states that are broke or close to it, know they are in for higher taxes and reduced benefits. And even those only casually interested in such things as the G20 meeting noticed that Obama stood against the entire world in his prescription for avoiding a double-dip recession by more borrow-and-spend. They also didn’t very much care about the problems of Greece or the condition of Europe’s banks, until they heard that those problems are as threatening as was the collapse of Lehman Brothers, and are very likely to hit the U.S. banking industry hard, which would further curtail credit on which small businesses rely.
So it should come as no surprise that only 27 percent of Americans tell Pew Research Center pollsters that they are satisfied with the direction of the country, compared with 64 percent (69 percent according to a Newsweek poll) who are dissatisfied. At 25 percent, Congress’s approval rating is at the lowest point in the 25 years in which Pew has been putting this question to its sample respondents.
Yet, amidst our angst, we are glad to be Americans. Some 76 percent are “very proud” to be Americans, and 74 percent strongly agree with the statement that they would rather be citizens of America than any other country (the comparable figures for, say, Britain are 51 percent and 40 percent, respectively). We also retain our American optimism: 64 percent are somewhat or very optimistic about life for themselves and their families over the next 40 years, 61 percent are optimistic about the future of the country, and 56 percent expect the economy to be stronger in 2050 than it is today. The long look is cheerier than the shorter-term view reflected in consumer confidence surveys.
From which it is possible to conclude that Americans, 42 percent of whom characterize themselves as conservative compared with 20 percent who call themselves liberal, are not unhappy with our economic and political system. We just don’t like the way it is being managed by the political class.