Economy Watch: More Debt-Ceiling Drama
The House and Senate are drafting two wildly different bills for raising the debt ceiling, and Obama addresses the nation on Congress' stalemate. And the Chicago Fed's index shows increased economic activity.
By Dees Stribling, Contributing Editor
Divided government is no mere catch phrase on Capitol Hill these days as members of the House and Senate, each led by opposing parties, were busy on Monday drafting their own mutually exclusively bills for raising the debt ceiling of the United States before August 2. Very large cuts in federal spending–as in more than $3 trillion over 10 years–seem to have gone away for the moment, though they lurk in the background. Talk of revenue increases are muted as well, but that’s never far in the background, either.
Curiously, the latest Senate Democratic plan calls for $2.7 trillion in cuts, while the latest House Republican plan calls for only $1.2 trillion. A more critical bone of contention, however, seems to be that the Senate plan calls for a debt ceiling increase that would take the country past the 2012 elections. The House plan wants to raise the debt ceiling just enough to have to do it again early next year.
On Monday evening, President Obama addressed the nation on the matter, quoting a previous president to put the onus on the Republicans. “Would you rather reduce deficits and interest rates by raising revenue from those who are not now paying their fair share, or would you rather accept larger budget deficits, higher interest rates, and higher unemployment? And I think I know your answer,” he said.
“Those words were spoken by Ronald Reagan,” said Obama. “But today, many Republicans in the House refuse to consider this kind of balanced approach… So we are left with a stalemate.”
Immediately after the president spoke, House Speaker John Boehner spoke as well, trying to put the onus on the president: “The sad truth is that the president wanted a blank check six months ago, and he wants a blank check today. That is just not going to happen.
“You see, there is no stalemate in Congress,” the speaker continued. “The House has passed a bill to raise the debt limit with bipartisan support. And this week, while the Senate is struggling to pass a bill filled with phony accounting and Washington gimmicks, we will pass another bill.”
Chicago Fed activity makes small gain in June
The Federal Reserve Bank of Chicago reported on Monday that its National Activity Index edged up in June to minus 0.46, from a reading of minus 0.55 in May. Three of the four board categories of indicators that make up the index improved in June, but only one was positive itself: the sales, orders and inventory category, which registered a positive 0.04 in June.
The index’s three-month moving average, known by the unwieldy name CFNAI-MA3, was down to a negative 0.6 in June from a negative 0.31 in May. According to the Chicago Fed, that suggests that growth in national economic activity is below its historical trend. But at least there currently isn’t much inflationary pressure, says the Chicago branch of the central bank.
Equities markets in Asia and then Europe were down on Monday, and when it became Wall Street’s turn, U.S. equities markets were off as well. The Dow Jones Industrial Average lost 88.36 points, or 0.7 percent, while the S&P 500 and the Nasdaq both declined by 0.56 percent.