In response to a recent editorial in the N&O, I submitted the following letter:
The N&O editors claim that President Obama “plainly is correct” in his warning that a higher payroll tax would depress the economy because “consumer spending is key to the recovery.”
But the President and N&O editors are plainly wrong. The fact is, consumer spending is now higher than it was during the height of the pre-recession boom. Data from the Bureau of Economic Analysis (BEA) shows that inflation-adjusted personal consumption expenditures (PCE) had already climbed back above the pre-recession heights by fourth quarter of 2010, and is currently running 1.4 percent higher than that previous high. Indeed, PCE only dipped by a mere 3.4 percent at its lowest point in the recession.
The true cause of the recession is a lack of investment spending by businesses. Nonresidential, private fixed investment dropped by a dramatic 22 percent from its pre-recession peak to its lowest point. It is still running 8 percent below its pre-recession high point.
The data clearly shows that consumer spending is not the problem. Obama and the N&O editors unfortunately insist on ignoring the facts and instead thoughtlessly propagate a dangerous myth.
In so doing, they advocate for policies that damage our economy and prolong the pain.