The Spin

The American economy is not in very good shape. Since the beginning of the year, unemployment has risen from 7.6 to 9.5 percent. The good news is that inflation is holding steady, but the bad news is that in spite of extremely low interest rates and a massive amount of government spending, the economy is still sputtering.

Of course, the Obama administration says that last month's data showing that only 467,000 people were added to the unemployment roles is good. At least Americans weren't losing 700,000 jobs! That is a tough sell. As Obama continues to flood the economy with government money, one would expect the economy to gain some traction. The problem is that real earnings fell by 0.3 percent from April to May and there lies the problem. There is a net decrease in earnings combined with a lowering of Consumer Confidence levels. From May to June, the number of people who thought that business conditions were bad increased from 44.5 to 45.6 percent. With a combination of less real earnings and low consumer confidence, the likelihood of increased spending in the economy isn't very good. The event that is most feared by economists is deflation in which the value of everything falls and people clamp onto their dollars to save them.

The other problem, of course, is that less spending means less revenue for the government. The amount of debt that some states and the Fed are running up is not encouraging. The spin we get about the economy from the Obama policy team may not be as bad as the spin of inflation that will come from the government spending. One has to hope that the economy gets some real traction and the business climate improves.