If there is common ground among economists, it is that the next step in fiscal policy should be focused on reining in long-term spending on entitlements programs, particularly Medicare, instead of continuing debates over short-term spending. But such a grand bargain has been elusive, caught in a fight over Obama's desire for more tax revenue and Republican opposition to more tax increases.
Obama and some Republicans are trying to move the process with phone calls and a dinner here and a luncheon there. Next week, the president plans to address Democrats and Republicans in the House and Senate in separate meetings to see, as he put it Saturday in his weekly radio and Internet address, "if we can untangle some of the gridlock."
Who gets credit does have political consequences. A strong economy would create more space for Obama to pursue other aspects of his second-term agenda. But it's an important question for the long term, too, because if the recovery is indeed accelerating it could validate the policies that the Obama administration and the Fed put in place.
Hiring has been boosted by high corporate profits and by strength in the housing, auto, manufacturing and construction sectors. Corporate profits are up. Still, it might be too soon to declare victory. While the recovery may be getting traction, the U.S. economy is not yet strong.Economic growth is forecast to be a modest 2 percent this year. Unemployment, even as it drops, remains high nearly four years after the end of the Great Recession, with roughly 12 million people out of work. Last year's early months also showed strong job gains only to see them fade by June. March could prove to be a more telling indicator as the economy responds to a third month of higher Social Security taxes and as across-the-board spending cuts that kicked in March 1 begin to work their way through government programs. Economists say anticipation of the cuts already caused a downturn in the fourth quarter of last year as the defense industry slowed spending. The Congressional Budget Office and some private forecasters say the coming cuts could reduce economic growth by about half a percentage point and cost about 700,000 jobs by the end of 2014.