Tonawanda News —
The draconian dose of austerity is meant to force Republicans and Democrats to compromise. If they can’t and taxes go up and spending gets slashed, the economy will plunge into recession, contracting at an annual rate of 1.3 percent in the first six months of 2013, according to the Congressional Budget Office.
The rest of the world is slowing. Much of Europe is in recession as policymakers struggle to deal with high government debts, weak banks and the threat that countries will abandon the euro currency and wreck the region’s financial system.
European Central Bank President Mario Draghi said Thursday the bank is preparing to buy government bonds to help drive down borrowing costs in debt-ridden countries like Spain and Italy.
The high-powered economies of China, India and Brazil are also slowing sharply, partly because Europe’s troubles have hurt their exports.
In the United States, the Federal Reserve earlier this week passed up a chance to approve new measures to jolt economic growth but signaled it was ready to act if growth and hiring stayed week. That led many economists to predict the Fed would announce a third round of bond purchases designed to push long-term interest rates down and generate more borrowing and spending in the economy.
If the previous three months of lackluster job creation were not enough to spur the Fed into acting more aggressively, then Friday’s numbers “must surely kill off the possibility of imminent action,” said Chris Williamson, chief economist at Markit in London.
The job market still has a long way to go. The economy lost 8.8 million jobs from the time employment peaked in January 2008 until it hit bottom in February 2010. Since then, just 4 million, or 46 percent, have been recovered. Never since World War II has the economy been so slow to recover all the jobs lost in a downturn.