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July 5, 1991
Mortgage rates edged lower this week, as bonds continued to be helped by falling commodity prices. A recovery, even a strong one, holds no fear for investors so long as inflation stays under control. So far, so good.
New data suggest that a strong recovery is just what may be underway: the respected Purchasing Managers' Index jumped from 45.4% in May to 50.9% in June.
New Home Sales lagged in May, down 3.3%. But industry continued its rebound: May Factory Orders were up 2.9%. Today's NonFarm Payroll report showed a 50,000 slip in June, but it was overwhelmed by a revision upward in the May figure.
If we've got a recovery underway without new inflation, what do we have to worry about? There is still the deficit out there the cement Frankenstein in the economy's parking lot. ("We were out there minding our own bsiness, doing donuts, then WHAMMO!).
It may be too much good news for one column, but there are some peculiar signs of deficit progress out there.
The Federal budget deficit didn't exist as a persistent problem in American history until 1961. Since then, we have been in red ink 29 out of 30 tries.
The gridlock: one side says more defense spending, and no new taxes; the other, more social spending, cut defense, raise taxes. No compromise.
No matter which general "side" you are on, the worst problem has been the gridlock itself. No decision. No way to get Congress to move. Congress has been able to avoid accountability, get reelected, and keep piling on the debt.
At the founding of the nation, there was one member of the House of Representatives for about every 40,000 citizens. Fifty years ago, the number was one per 320,000. Today it's pushing 600,000. We shouldn't be surprised that today's Reps are harder to pin down, harder to find, harder to punch in the nose (an old American political option, now out of favor. Too bad.)
What used to be the bad news is now the good news: Congress has taken itself out of the game.
Local government has inherited the budget problem, mostly through an end to Federal goodies. From Connecticut to California, legislatures are making real decisions: new revenue or cut spending right now, this week, no foolin', no more borrowin'.
Local government can make hard choices because they are still in touch with the people. They can't get out of touch: their offices are right here in town, or just a little ways upstate. It's still going to hurt, but it'll get done. `M81691.html
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