Politicians and people ignore signs of economic trouble

Politicians and people ignore signs of economic trouble

As troublesome economic indicators continue to mount, it is time to suggest that there will be no fast lane out of this recession. What we’re seeing are symptoms of bad economic decision making for years — in some cases decades — and it is going to take time to correct those mistakes.

The $160 billion economic stimulus package will give the economy a shot in the arm, but tougher medicine is going to be needed.

Yesterday the Commerce Department reported that U.S. consumer confidence slid to a five-year low in March and expectations for the future were at the weakest level in 35 years.

No great surprise

That makes perfect sense, given a recent report by Merrill Lynch that showed U.S. consumers are spending 36 percent of their disposable income on food, energy and medical care. That’s a larger proportion of income on those necessities than at any time since records were first kept in 1960, the Associated Press reported.

Traditionally, consumers lead the way out of a recession by spending their way out. That was one of the factors in the mid-1970s when then-young baby boomers were happy to spend whatever money they had. Today, those baby boomers are still large in number, but they’re closer to retirement age and far more cautious in their spending habits.

Millions of younger potential spenders have been caught up in the mortgage crisis and housing slump. They are among an estimated 9 million households that now have upside-down mortgages — they owe more on their houses than their houses are worth. Merrill Lynch reports that for the first time, aggregate mortgage debt is bigger than the total value of homeowner equity — by $836 billion.

And while there are some pockets of economic growth in the country, as The Christian Science Monitor reported yesterday, national policies continue to weaken the economy.

The nation continues to run up enormous debt, energy costs increase with no end in sight and trade deficits continue. Any decrease in the trade deficit that is likely to be seen because of exports attributable to a dramatically weaker dollar will be offset by the billions of dollars being spent to import oil.

Ignoring reality

Yet, standing at the bottom of a mountain of growing economic bad news, no one in the administration, very few in Congress, and none of the three major candidates for president has yet had the courage to say that painful changes are going to have to be made. The stimulus plan is only an imperfect stopgap measure, not a solution.

We have become a nation in which politicians are unwilling to talk about pain or sacrifice, because they have learned that Americans do not vote for politicians who predict or demand pain and sacrifice.

But while neither political party has had the courage to talk about it, pain has been sneaking up on Americans in higher prices, stagnant wages, lower disposable income and an increasing sense that this isn’t the way it is supposed to be.