Early this year, the U.S. economy went over half of a fiscal cliff or more — a supposedly draconian sequester plus some tax increases, albeit not the across-the-board hike that formed the full cliff. From all that appears, the U.S. economy has lived to tell about it.
Neil Irwin and Ylan Q. Mui of the Washington Post rehearse some of the good news:
Housing prices rose faster over the past year than they have in the past seven, according to data out Tuesday. Consumer confidence hit its highest level in five years. The stock market rallied another 0.6 percent as measured by the Standard & Poor’s 500, leaving it just short of an all-time high reached last week. And the national retail price of gasoline fell for six days straight through Monday and is down 16 cents a gallon since late February. . . .
Gross domestic product rose at a 2.5 percent rate in the first quarter, a bit better than the average over the past several years, and the nation added an average of 196,000 jobs a month in the first four months of 2013, up from 180,000 in the second half of 2012.
Meanwhile, the direct evidence is scarce that government’s tighter control over spending is damaging growth. A 2 percentage point increase in payroll taxes that took effect Jan. 1, reducing the take-home pay of all American workers, would be expected to put a big damper on consumer spending. But personal consumption expenditures rose at a 1.2 percent annual rate in the first quarter, a not-too-shabby result.
The Post-men hasten to add that growth might have been more robust yet without the austerity measures. But this possibility doesn’t negate the fact that doomsday predictions about the consequences of the sequester, including those of the Obama administration, so far are wildly off-the-mark. Folks are likely to remember this the next time President Obama tries to resist fiscally responsible measures by crying “wolf.”
Obama, though, should benefit from the relative strength of the economy. Unfortunately for the Democrats, that benefit may be negated by the impact of Obamacare implementation and, to a lesser degree, one or more of the percolating scandals.
Congressional Republicans stand to be the biggest winners. The held their nerve and obtained some spending cuts without sinking the economy. And they continue to oppose Obamacare. As things stand now, and assuming they resist amnesty, voters are unlikely to perceive any reason to punish congressional Republicans.