Be careful what you wish for. By the end of last week, I was looking for a reprieve from Anthony Weiner stories. Every newscast I watched or listened to and almost every bulletin on the internet dealt with another facet of this widely covered and fully uncovered story. I am from the school of thought that public officials should not only provide leadership but should also serve as role models. I would like my kids to view public service as a desirable higher calling and view our elected officials as exemplary citizens. Sleaze and corruption undermines interest in government service and undermines the very fabric of our society. If you can’t have confidence in our elected officials, can you have confidence in our government?
What turned attention away from Anthony Weiner in this area was the Dow Jones Industrial Average closing below the 12,000 point level on Friday, June 10th. The headlines now focused on the DJIA decline over the last month and the perceived increased weakness in our economy. What was happening to our recovery? What was happening to jobs creation, to housing prices, and what would the impact be on the 2012 elections?
Last October, I had the pleasure of being invited to an economic conversation with Netherlands Prime Minister Jan Peter Balkenende. As a higher education economist, I am always cautious in conversing about national and international economics (especially with a Prime Minister) but at that conversation I made one key point that remains fully relevant today. The economy is moving forward and the White House, the Congress, and the Federal Reserve all deserve credit. I am pleased to note the increasing viability of Detroit and I am pleased to see the increasing strength of our financial institutions. But without a 360 degree view, you are not seeing the entire picture and you are not in a position to accurately gauge our economic vulnerability.
I live on Long Island, in New York State. I like Long Island and I like the proximity to New York City, but Long Island, New York City and New York State are all encountering dire financial situations. New York in general and Long Island specifically, has lived outside of its means and newly elected government officials are working diligently to restore the financial viability of the area. Jobs are being cut on the local and state level, programs are being curtailed, benefits for existing workers and especially for new hires going forward are being reduced, and a tax cap has achieved more popularity than Lady Gaga. What is happening in New York is also happening in many other states. Often politicians defend these cuts as resulting in doing more with less. To some extent this may be true but to a greater extent we are doing less with less because there is no other alternative.
With states and localities cutting back, there is a significant drag on the economic recovery. A recovery requires a certain momentum and a certain velocity. We want that momentum and that velocity to result in a robust economy. But just as Washington has helped provide that initial thrust, New York and other states have provided increasing downward drag on the economy. This will not be a vibrant economy anytime soon, we will not be impressed with the gains in employment and in the Dow Jones. I think we are on the right track, however, and if we stay the course, the economy – absent any external shocks – we will continue to move forward.