Raising the Debt Ceiling

Stalled U.S. growth numbers have sobering effect

Marketplace Staff Jul 29, 2011
HTML EMBED:
COPY
Raising the Debt Ceiling

Stalled U.S. growth numbers have sobering effect

Marketplace Staff Jul 29, 2011
HTML EMBED:
COPY

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.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.