Economy

BLAME GAME — President Obama and Republicans pointed fingers at each other Tuesday over an economy showing signs of slowing down.

Obama, in his first remarks at the White House after his family vacation, tried to reassure the country that the economic recovery will hold, and pressed Republicans to allow a vote on a small-business lending bill.

Obama, in the Rose Garden, called GOP opposition “directly detrimental to our economic growth," reports The Hill's Sam Youngman.

The president "said his administration 'remains focused every single day' on improving the economy, and complained that the small-business bill has 'been languishing in the Senate for months.' " http://bit.ly/aFtz4W

GOP leaders Sen. Mitch McConnell (Ky.) and Rep. John Boehner (Ohio) hit back, saying Democrats have increased debt and would increase taxes by letting the Bush-era tax cuts for the wealthy expire.

McConnell: "So it’s no surprise that most Americans think the country is on the wrong track and that Democrat policies have failed to do anything to fix their top concern, the economy." http://bit.ly/cDIwHZ

Worth noting... GOP gets "unprecedented" 51 percent of support in Gallup generic ballot. http://bit.ly/d0b74x

Despite last week's downgrade of 2Q GDP growth, consumer spending rose 0.4 percent in July, the biggest jump since March. http://bit.ly/9mxFa3

Still, income growth was weak, and auto sales may hit a 28-year low. http://bit.ly/a6i4LY

Obama to address AFL-CIO on Labor Day. Sam Stein: http://huff.to/dAU14K

REVISITING THE SIZE OF THE STIMULUS

WH press secretary Robert Gibbs, when asked at his Tuesday briefing if the $814 billion stimulus was too small, said "nobody had, in January of 2009, a sufficient grasp at the sheer depth of what we were facing." http://bit.ly/bwuUNF

Left-leaning economists blog their disagreement.

CalculatedRisk recalls reports of Christina Romer pushing for a larger stimulus. http://bit.ly/csFRzY

Brad DeLong finds Gibbs "off message." http://bit.ly/adxAs8

But Megan McArdle doubts the stimulus could have been much bigger: "...even if Republicans had simply magically disappeared, the government still would not have been able to borrow and spend $2.5 trillion in any reasonably short time frame, much less $4-5 trillion." http://bit.ly/bOcejT

Matt Yglesias finds Fed vacancies forcing Bernanke to muddle the message, thus hurting the economy — and Dems' chances in the fall. http://bit.ly/cpbMNb

DEBT COMMISSION

Gibbs also said Tuesday that Alan Simpson will remain on the WH panel, despite his Social Security-as-a-cow e-mail. http://bit.ly/a2TdQ8

Dems on the fiscal commission more centrist than Republican members, Ezra Klein finds. http://bit.ly/citXAG

Something for the right: WSJ edit board says Obama is using the commission's talks on Social Security reform to play "bait-and-switch" on Republicans: "This has all the earmarks of a political bait and switch designed to ambush Republicans if they're gullible enough to believe his bipartisan pleas." http://bit.ly/alpx58

Sounds like the scenario Rep. Paul Ryan (R-Wis.) has warning about. http://bit.ly/cz7NCn

And something for the left: WaPo: "Women Set to Bear 72% of British Austerity Cuts."  http://bit.ly/ck6KFa 

NOW and other women's groups last week warned of the disproportionate effect that Social Security benefit cuts will have on women last week in going after Alan Simpson. http://bit.ly/d3o1OR

Budget impact story of the day: "Cash-Poor Governments Ditching Public Hospital." WSJ: http://bit.ly/aNgKXY

Coming Wednesday/Thursday... Financial Crisis Inquiry Commission to hold hearing on "too big to fail" with Bernanke, FDIC Chairwoman Sheila Bair, and former Lehman CEO Dick Fuld. http://bit.ly/aoM58k

U.S. Chamber of Commerce leaders are introducing Labor Day this week with a Thursday discussion on the policy issues they say are hobbling the job market.

President Obama on Monday renewed his call for the Senate to pass legislation providing tax breaks and loans to small businesses. 

The measure so far has been stalled by Republican opposition, much to Obama's chagrin. 

Pennsylvania Gov. Ed Rendell (D) said Monday the Obama administration needs to produce a targeted investment plan for infrastructure spending to change the November election outlook for Democrats. 

To shift the tide back into the favor of Democrats, President Obama needs "a fairly strong economic initiative" and, at the same time, should pin the responsibility on Republicans for not passing a small-business bill that would provide tax cuts and other incentives, he said today during an interview on MSNBC.

"Republicans repeat it like a mantra, 'we've got to help small business', but here we can put $30 billion into a lending stream and Republicans have single-handedly blocked it," Rendell said about the small-business bill that has languished in the Senate. 

Rendell didn't provide a dollar figure for the infrastructure investment but said Obama has to move forward with "a significant program to invest federal dollars into infrastructure spending."

Weakening economic indicators have prompted the United Steelworkers union to call on Congress to stop China's currency manipulation. 

Consumer spending picked up pace in July, hitting its highest level in four months as the demand for cars bolstered the numbers. 

Spending rose at a 0.4 percent pace last month after three months of relatively flat spending, the Commerce Department reported Monday. 

The gain in spending showed a 1 percent increase in demand for durable goods, about half of which came from consumers buying automobiles, the report said. 

Consumer spending was up 0.5 percent in March but was followed by a 0.1 percent drop in April, a slight 0.1 percent increase from May and flat spending in June. 

Personal incomes also were up 0.2 percent in July, but that's less than expected despite the improvement over June, when incomes remained unchanged. 

The Bureau of Labor Statistics (BLS) reports that July was the worst summer on record for youth seeking employment. 

Data released by the Commerce Department on Monday showed personal income inched up 0.2 percent in July, a modest improvement from June, when income stagnated.

THE WEEK AHEAD

July consumer spending report due out Monday, July manufacturing and construction data due Wednesday, and the August jobs report coming on Friday.

Bloomberg: "Federal Reserve officials face another round of reports projected to show weakening growth amid skepticism they have the firepower to deliver on Chairman Ben S. Bernanke’s pledge to avoid a relapse into recession." http://bit.ly/cgui7a

President Obama on NBC Sunday: "The economy is still growing, but it's not growing as fast as it needs to." He urged Congress to pass measures to increase lending to small businesses and provide them with tax breaks, but said there's no "magic bullet." http://bit.ly/abSqaa

FED RETREAT ROUNDUP

NYT: "Bernanke Tries to Manage Expectations of Fed Role"

"So even as Mr. Bernanke outlined the Fed’s options and credited stimulus packages with helping the global recovery, he appeared to be tamping down expectations for a government-led fix. 'For a sustained expansion to take hold, growth in private final demand — notably, consumer spending and business fixed investment — must ultimately take the lead,' he said.

"He added, optimistically, 'On the whole, in the United States, that critical handoff appears to be under way.' " http://nyti.ms/a6SYPI

Central bankers at the weekend Fed retreat see "slog" but expect recovery to stay on track. WSJ: http://bit.ly/d5kmk7 

Economists believe Bernanke on the right course... http://bit.ly/aNTGrQ

China relying on state-run companies for growth. NYT: "As the Chinese government has grown richer — and more worried about sustaining its high-octane growth — it has pumped public money into companies that it expects to upgrade the industrial base and employ more people. The beneficiaries are state-owned interests that many analysts had assumed would gradually wither away in the face of private-sector competition." http://nyti.ms/clEfUQ 

Japan's central bank expanding loan program to stimulate economy. http://bit.ly/a7xoBa

THE WEEKEND'S MUST READ: Peter Goodman in NYT's Week in Review, "Policy Options Dwindle as Economic Fears Grow." Or... Deficit fears trump stimulus. Or... Is U.S. facing Japan-style deflation?

"This is where the Great Recession has taken the world’s largest economy, to a Great Ambiguity over what lies ahead, and what can be done now. Economists debate the benefits of previous policy prescriptions, but in the political realm a rare consensus has emerged: The future is now so colored in red ink that running up the debt seems politically risky in the months before the Congressional elections, even in the name of creating jobs and generating economic growth. The result is that Democrats and Republicans have foresworn virtually any course that involves spending serious money.

"The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s." http://nyti.ms/946NFr

And/but... The government has the money to borrow and spend, thanks to investors pouring money into bonds. Bloomberg: "That’s a turnaround from 16 years ago, when Bill Clinton was forced to abandon stimulus plans after his advisers said the bond market would punish him with higher borrowing costs if it sensed swelling deficits." http://bit.ly/9kavqR

States see pickup in tax revenue. WSJ: http://bit.ly/c9G2zU

Lincoln touts earmarks in reelection bid. AP: http://bit.ly/9Hwy7t

FINREG UPDATE: Reform now in hands of regulators, writes Gretchen Morgenson. Their decisions will decide whether the Wall Street bill accomplishes two of lawmakers' major goals, greater price transparency on the markets and the opening of transactions to more participants.

"The question is this: Will regulators give Wall Street’s big dealers what they want in a second bite of the apple?" http://nyti.ms/9GXQAT

Meanwhile, next month in Switzerland — Global talks on bank regulation:

"... regulators from around the world try to reach an agreement on new banking rules aimed at preventing another financial crisis... The nub of the negotiations: How much capital should banks be required to hold to absorb losses if loans or other investments go bad?" WSJ: http://bit.ly/cPVBCq

CUE THE OUTRAGE: WSJ: "Wall Street bonuses may come earlier this year.

"With the specter of higher taxes looming in 2011 and banks still reeling from last year's U.K. bonus tax, executives at some financial-services companies are considering whether to pay year-end bonuses, traditionally doled out starting in January, sooner." http://bit.ly/ame2vU

"They need to resign because the policies that they're putting in place are not being effective," Rep. Tom Price (R-Ga.) said.