Washington and the Global Economic Rout

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I’m wary of causal leaps, but here’s Steve Gandel explaining the worldwide market plunge and why Washington’s little debt ceiling pirouette didn’t help:

So far this week we have gotten economic reports that show spending by consumers and manufacturing activity have both been falling recently. Around the world overall inflation is falling as well, which could be a sign that global growth is on the rocks. Early indications are that the monthly jobs report, which comes out tomorrow, will be disappointing as well. On top of that, the European Central Bank said that more may need to be done to mend the finances of Spain and other European countries if those strapped governments are to avoid default.

…the big impact of the [debt] deal may not be the direct drag of a decrease in spending. At different times in the debt deal negotiations, it looked like we could get either an increase in taxes for the wealthiest Americans, an increase in unemployment benefits or both. In the end we didn’t get either. Nor did we get a reduction in entitlement programs that benefit everyone. Instead, what was cut was largely discretionary funds, a large proportion of which go to programs that help the poor….

The debt deal seems to make it clear that Washington, at least for now, has no plans to deal with the income gap. Not only that. It seems unlikely after that trying to claim victory in the debt deal, any politician would turn around and say, “OK now we need to spend money on programs to boost employment.”

Obama has just announced a bus tour of the industrial midwest and rolled out anther mini-buffet of fiscal stimulus options for Congress to consider when it returns from its laborious month of vacationing and screwing FAA workers. Of course, talk is cheap, manufacturing is in decline and Obama has just locked in federal budgets for the near-term with the debt deal. He’s going to have a hard time finding free cash for any of his proposals — or any Republican congressmen to vote for them.

Happy Thursday!