Stalled U.S. growth numbers have sobering effect

U.S. President Barack Obama speaks on the economy following a tour of Cree, Inc., a manufacturer of energy efficient LED lighting and a meeting with President's Council on Jobs and Competitiveness, in Durham, N.C., June 13, 2011.

Steve Chiotakis: The nation's economy expanded between April and June alright, but only at an annual rate of 1.3 percent according to the Commerce Department. Basically half the level needed to reduce the nation's high unemployment rates. Those numbers could come in to play on Capitol Hill where House leaders have rescheduled to today -- a vote to cut the federal deficit while raising the debt ceiling.

Jill Schlesinger is editor-at-large at CBS/MoneyWatch. She's with us from New York, live, as she is every Friday morning. Good morning, Jill.

Jill Schlesinger: Good morning.

Chiotakis: Let's forget the politics -- and I want to get to the debt ceiling debate going on in Washington -- this plan versus that plan, because both plans cut spending and raise the debt ceiling. The GDP report is really disappointing. What would either one of them do to an already fragile economy

Schlesinger: Let's be clear -- when the government spends less, it has a negative impact on the economy. The bigger the short term cuts, the lower the GDP. The reduction in all government spending this year alone has shaved a little more than 1 percent off total growth.

Chiotakis: These plans, Jill, don't include tax increases, right?

Schlesinger: Nope.

Chiotakis: So they're a down payment I would imagine on getting the U.S. fiscal house in order. Wouldn't that encourage private sector growth?

Schlesinger: The evidence is murky from the consumer point of view if taxes are at these levels -- or even if they get extra money, they're going to pay down debt. Just learned that consumer spending in the second quarter was the weakest its been in two years, so companies aren't seeing enough demand for goods and services to justify new hiring. I think we're stuck here, Steve.

Chiotakis: Alright, we're stuck. Jill Schlesinger from CBS/MoneyWatch. Thanks.

Schlesinger: Thanks, Steve.

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