The Real Threat to Our Recovery

I recently wrote on the most recent jobs report and expressed optimism about the recovery and the economy in general.  I want to note that the report is good but not great.  The unemployment rate is decreasing but we are a far way off from natural unemployment, which is typically understood as 4-5 percent.  I say this because although economic indicators are good the recovery is not over and attempts to boost the economy should not be halted due to a somewhat better jobs report. There are still plenty of threats to this recovery.

The first and most obvious threat is the European financial crisis.  Europe’s economy is more fragile than ours and their recovery is non-existent.  Greece is still causing a lot of problems and bringing other countries down with it.  If the EU does not get the economy on the right track it could be detrimental to the recovery here in America.  With that said an interesting article by Paul Krugman points out the relationship between Europe’s recovery and us might not be as closely related as everyone seems to think. Most states export very few goods to Europe signaling their economies are not all that dependent on Europe’s economic prosperity.

The biggest problem does not lie in Europe but rather in Washington.  The bigger problem is whether or not Congress decides to continue this crusade on the national debt or make that secondary with the main issue being continued economic growth.  If the former is pursued the recovery will get worse while pursuing the latter will lead to more growth. Ending pro-growth policies in the name of reducing the debt will only lead to a more depressed economy.  This means things like the payroll tax-cut need to be extended for at least another year along with an extension of unemployment benefits.  Other spending to promote job growth should be encouraged right now.  The recovery is not over and any ideas to speed it up should be welcomed.

We do not have control over Europe’s recovery but we do have control over our own policies.  So let’s use the tools we do have control of to help this recovery and not use them on less pressing matters like the national debt.


One thought on “The Real Threat to Our Recovery

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