DOLDRUMS – AT 9:48 A.M. ET: The economy will be the major issue in the election, barring some international catastrophe. And how are we doing?
Straight-talking Charles Gaspirino, a Fox News business correspondent with a reputation for leaving off the sugar coating when reporting on business conditions, lays it on the line in the New York Post:
...just a couple months ago we all thought (including me on these pages) that we were heading for a sustained recovery, as job growth seemed to have picked up steam and most financial gurus predicted that it was just a matter of time before the strong data translated into meaningful wages and a more vibrant economy.
But now we see just the opposite, at least according to the latest data, and the prediction a slew of market strategists and investors made to me even before last week’s round of bank “downgrades” by the raters at Moody’s Investors Service.
Our low growth and jobs woes can be traced to a number of factors, of course — from Europe’s mess and China’s slowdown to the ongoing assault of higher taxes and increased regulations at the heart of Obama’s economic agenda.
Bottom line: We only limped out of recession, and the limp’s been getting worse the last few months. Now the Moody’s actions might just be the final straw that pushes a barely growing economy into negative territory.
In other words, the possibility of a double-dip recession.
We all know that banks aren’t lending anywhere near as much as they’ve done in the past. Among the many reasons for that is that banks believe that the economy could turn south at any moment, thus making it more difficult for businesses to repay those loans.
And the lower bond ratings just made lending much more difficult. Banks will have to pay more to borrow and finance their own balance sheets. They may also have to hold more capital, all of which means they will lend even less to cash-strapped small businesses.
In short, the cost of business just went up for everyone.
Does this mean that the country is sure to head into recession? No, those predictions are difficult. But none of this is good for the economy, the country or whoever is in the White House come Inauguration Day.
COMMENT: Be aware, though, that a terrible economy is not a guarantee of a Romney victory. Jimmy Carter, presiding over an absolutely awful economy, was leading during most of the 1980 presidential campaign. It was only in the last weeks that Ronald Reagan surged into the lead.
Romney is not on Reagan's level as a campaigner, whereas Obama is far better on the stump than was Carter. But Romney starts out, statistically, in a much stronger position than did Reagan, and he's been running a smart, energetic campaign. No guarantees, but guarded optimism is warranted.
June 26, 2012