Washington running out of options on economy

The U.S. economy was pummeled with more bad news this week, as the housing and finance markets performed poorly and the nation’s gross domestic product growth was reported to be “far more anemic than previously estimated,” according to the Los Angeles Times. On Tuesday, House Minority Leader John Boehner called for Barack Obama to fire his entire economic team, saying that “the writing is on the wall.”

Between April to June, the gdp growth rate was a disappointing 1.6 percent, the Commerce Department reported on Friday. Sluggishness was partly attributed to the largest increase in imports in the last 26 years. The housing market also slumped, with house sales falling to their lowest levels in a decade (as the government homebuyer tax credit expired). Spending on big manufactured items declined as well.

In July, the unemployment rate was reported as 9.5 percent nationally. With economic growth at such a slow pace, that figure is expected to rise.

The L.A. Times wrote, “[J]ust as there is widespread agreement that the economy is faltering, there is also a sense that the federal government is running out of options to rebuild momentum.”

On Friday, Federal Reserve Chairman Ben Bernanke said the economic outlook is “inherently uncertain.” He also said that it “remains vulnerable to unexpected developments.” Just weeks ago, the Fed announced plans to resume purchase of long-term U.S. treasury bonds in an effort to keep interest rates at bay, admitting that growth was more modest than expected.

Chairman of the joint chiefs of staff Adm. Mike Mullen also expressed concerned about the burdensome national debt. Referring to the interest on the debt alone, he said, “That’s one year’s worth of defense budget.” He added that the Pentagon needed to cut more costs.

According to Bart van Ark, chief economist for the Conference Board, a business research group, “All the indicators at the moment are pointing in the wrong direction. … The risk of things turning wrong and then dropping the economy into recession is significant.”

Economics professor at Cal State Channel Islands Sung Won Sohn also offered a bleak assessment of the situation, saying that the probability of the economy going into a double-dip recession is “40 percent and going up.”

“Housing is in the tank. Confidence is going down. The stock market is going down. It’s hard to imagine how consumers will spend,” he said. “This is a harbinger of weak economic growth to come for quite some time. Right now, it’s hard to see where we will get any sort of strength.”