The government reported Friday that gross domestic product rose just 2.5 percent in the first quarter. That was a little better than the final months of 2012 but hardly reason for optimism. Cuts in government spending, particularly declines in defense spending, were a major contributor to the weak growth report.
Across-the-board spending cuts imposed when Washington politicians could not find a more sensible way to resolve their differences over the budget, along with the ending of the wars in Iraq and Afghanistan, are adding downward pressure on an economy that needs the opposite. The private sector is doing little to offset the impact of those cuts. Wage growth remains mostly stagnant.
Guns and immigration dominate the debate in Washington — issues that are worthy of attention, but neither of which speaks directly to the issues that remain at the top of most Americans’ list of concerns, which include jobs, the economy and economic security. The political system appears frozen when it comes to dealing with those issues.
At the end of this past week, Congress found a way around the automatic spending cuts to prevent the furloughs of air traffic controllers, but the amount of money involved was a pittance in the overall scheme of the sequester balance sheet or the economy.
The coming fight over the budget and the debt ceiling seems at best a do-no-harm approach and at worst a further setback to turning around the effects of the 2008 recession and to the longer-term pressures on middle-class families.
Problems get more acute
Almost 21 years ago, Bill Clinton accepted the Democratic presidential nomination “in the name of the hardworking Americans who make up the forgotten middle class” and pledged they would be “forgotten no more.” Today the problems of those Americans are even more acute.
The latest issue of National Journal addresses this problem with refreshing directness in a cover story entitled “No Shelter From the Storm.” The magazine offers an examination of the current state of the middle class, a discouraging report that goes over familiar ground.
It chronicles the downward pressure on middle-class families over the past decade, from declining income and net worth to a falloff in the percentage of people in the labor force as discouraged workers give up on their job prospects. In reality, this is a much longer-term problem that has been with us for decades. The only recent time when there was much relief from these trends was during the economic boom of the late 1990s.