Anti-growth policies continue to frustrate the aspirations of working Americans. The economy is likely growing at less than 2 percent in the second quarter, making prospects for a better job market remote.
Higher payroll taxes and income taxes paid by the wealthy took away $165 billion in purchasing power. Consumers reacted, but with a lag, because they need to keep driving to work and feeding their children. Now car dealers and shopping malls report slowing sales.
Overall, the fiscal drag of those higher taxes and another $44 billion in federal outlays mandated by sequestration are subtracting a tidy sum from aggregate demand. But the focus on short-term budget policies fails to reckon with a tougher issue—before these, even with record government spending and rock-bottom interest rates the economy has averaged only 2.1 percent growth since mid-2009. By contrast, the Reagan recession was just as deep and wrenching as the Obama recession, but the Gipper accomplished 5.3 percent growth over the comparable period.
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