The (American) economy is not well.” Economist Sung Won Sohn’s recent statement hasn’t received much attention as the nation girds for war. However, once the nation begins to refocus its attention on the U.S. economy after the immediate crisis in Iraq is resolved, it will discover our current leadership has no vision and no plan to resolve our current economic conundrum.
The economy is slumping in several important ways. The U.S. Department of Labor reported last week that 380,000 payroll jobs were lost across the nation in February. Although many corporations have money to invest in job creation, it appears that imminent war has caused these businesses to postpone job-creation spending. A war in Iraq could disrupt the job market even more. Once the immediate crisis is over in Iraq, businesses will begin to invest again. However, whether corporations will choose to emphasize capital or employment investment after a war is unknown. It appears for the time being, however, that the sluggish job market will slouch on.
Besides job insecurity, consumers are also being zinged by a slight rise in the cost of essential raw materials. Current gasoline prices – in real terms – have reached a 17-year high. It also appears the slight uptick in the cost of several raw materials, such as cotton, has forced the prices of many consumer goods to begin rising.
Job insecurity and rising prices have eroded the relative wealth of many Americans. These trends, combined with war anxiety, have shaken the confidence of many consumers, and consumer spending – the constant that has kept the nation’s economy fairly steady since Sept. 11, 2001 – is showing signs of slowing down.
The George W. Bush stimulus package, as designed, will not stimulate immediate job creation and consumer spending, the two positive shocks most urgently needed in our economy; instead it would delay most tax refunds until at least 2004 and give a vast majority of tax returns to the investment-minded wealthy. Therefore, in order to get our economy moving in a more positive direction, Congress must formulate an alternative economic stimulus package that stimulates the base of our economy – lower- to middle-class consumers – to begin spending again.