Is gov't aid nearing its limits?

A construction worker measures a window as he works on a new home at the Olson Homes Garden Walk development in Hayward, Calif.

TEXT OF STORY

Kai Ryssdal: We will begin today with the numbers. Not those, we'll get to those later. You know that. The numbers of interest today were about new housing construction and inflation. Inflation-wise there is still not a whole lot to worry about. The Consumer Price Index rose a modest two-tenths of 1 percent. That's an OK number given the state of the rest of the economy. Of course that leads us back to the housing market.

We learned this morning new home construction dropped more than 10 percent in October. Now one month's shaky numbers do not a double-dip recession make, but the economy did get some high level attention today, as our senior business correspondent Bob Moon reports.


BOB MOON: The surprise downturn was a startling revelation for many economists. It shows just how critical government support remains to the barely budding economic recovery. It's also raising urgent questions about just how long the government can keep this up.

David Crowe is chief economist at the National Association of Home Builders. He says while Washington wrangled over extending a tax credit for homebuyers, nervous builders put construction on hold.

DAVID CROWE: The builders slowed down in production to make sure they didn't get ahead of themselves.

They've cut back, in fact, to their smallest new-home inventory in more than a quarter-century. Get this: the number of new homes for sale has dwindled to just 251,000 in all, barely the size of some small towns.

Congress agreed earlier this month to extend the tax credit, and Crowe hopes that will now "work its magic," as he puts it, to turn around home sales and the overall economy.

But is just five more months really enough time to rekindle sales? Buyers need to sign a purchase agreement by the end of April to get the tax credit.

CROWE: After that, we've got to hope that that was the spark and the economy's starting to move forward, 'cause we've already told the Congress we're not going to come back and ask for more.

President Obama underscored that government support is nearing its limits, during an interview today with Fox News.

PRESIDENT OBAMA: If we keep on adding to the debt, even in the midst of this recovery, at some point people could lose confidence in the U.S. economy, in a way that could actually lead to a double-dip recession.

But today's numbers raise an additional worry: It's not just that the government is nearing its limits, but that the impact of all that stimulus spending might be limited, as well.

I'm Bob Moon for Marketplace.

About the author

Bob Moon is Marketplace’s senior business correspondent, based in Los Angeles.

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