Remember the famous Mexican stand-off at the end of the Sergio Leone Spaghetti Western “The Good, The Bad and The Ugly”? Three cowboys stand in a graveyard, each waiting for one of the others to draw their gun, to make the first move, each trying to outsmart, and maybe kill, the other two and make off with the gold.
That’s kind of what we’ve got going on in the economy right now (excepting for the killing part,) between consumers, businesses and the federal government. It’s a fight to see who’s going to blink first. But the blink in this metaphor represents who’s going to start spending money, and save the economy. Throw the Federal Reserve in there, too for good measure. They’re in this stand-off as well.
Don’t get me wrong. The United States is a $14.5 trillion economy. Money is being spent. But not the kind of money that will spark real economic expansion, which is what we need to start creating jobs for the 15 million unemployed Americans out there, and juice wage growth for the rest of us. Not just Wal-Mart greeter jobs, either; good jobs that pay good wages that create a stable and growing middle class. Nobody’s spending that kind of money.
Consumers aren’t spending money, because they are — justly so — worried about their jobs, their salaries, their futures. Businesses aren’t hiring because they are — justly so as well — worried about demand levels, their inventories and their cost structures. The feds and the Fed have both spent fantastic sums already, and while there is some urge to spend more, doing so may carry heavy political as well as credibility risks. So everybody’s waiting for somebody else to make the first move.