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 the Founders toward overweening government, in this case our own. Most Americans want to see spending reined in and taxes cut.
A handful of moderate Democrats — those from marginal districts — are sufficiently responsive to their constituents’ aversion to more deficit spending. 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.
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, job-creating companies are battening down the hatches rather than setting sail.
Eighty percent of corporate finance executives responding to a survey by the Association for Financial Professionals said they expect to hold onto their record-high cash hoards or even expand them in the next six months.
All of this adds to Americans’ worries. And it explains why we were happy to have a long weekend with no economic news, a barbecue in the backyard, or plenty of sports on television 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 Coast, 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 suggested that job-creation momentum is slowing, and it 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.
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.
So it should come as no surprise that only 27 percent of Americans told 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’ approval rating is at the lowest point in the 25 years in which Pew has been putting this question to its respondents.
Examiner columnist Irwin M. Stelzer is a senior fellow and director of the Hudson Institute’s Center for Economic Policy Studies.