Fri, Dec 21, 2012 - Page 9 News List

Policy gridlock hurting US economy? Maybe not

Some economists doubt uncertainty has played a big role in holding back the US economy, and if they are right, growth next year could disappoint

By Jason Lange and Jonathan Spicer  /  Reuters

Households, whose spending drives more than two-thirds of the economy, are not as worried as the country’s CEOs, although a recent consumer sentiment survey showed concerns appeared to grow early this month.

Some economists say the most important issue for Congress is not to resolve policy uncertainty but rather to strike a fiscal deal that does not hurt the economy by ushering in harsh budget austerity measures.

Surveys of small businesses show companies are worried about higher taxes, but over the last few months and years they have worried even more about poor sales. Adjusting for inflation, household incomes are still lower than they were before the recession. This has depressed spending, a situation that could be exacerbated by tighter fiscal policy.

“The biggest uncertainty is whether the US consumer is really back,” said Stephanie Kelton, an economist at the University of Missouri-Kansas City.

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