The US recovery is stalling. As a matter of economics the balance of risks strongly favours further fiscal and monetary stimulus. Politics appears to rule out the first, and a divided Federal Reserve is hesitating over the second. America’s leaders are letting the country down.
The recovery is in danger of petering out altogether. Recent numbers have been dismal. Second-quarter growth was marked down to 1.6 per cent on Friday. Earlier, signs of a new crunch in the housing market gave the stock market another pummelling. Already low expectations were disappointed nonetheless: sales of existing single-family homes in July fell by nearly 30 per cent, to their lowest for 15 years. Sales of new homes were at their lowest since the series began to be reported in 1963.
Unlike most other advanced economies, the US could undertake further fiscal stimulus at acceptably low risk. Global appetite for its debt is undiminished. The risk, such as it is, could be all but eliminated if Congress could commit itself to stimulus now, restraint later – an easy thing, you might suppose, but evidently beyond its grasp. The administration could and should be pushing for just such a package, but it is not.