May 29—Politics is directly intersecting with the economy — macro, micro, public and personal — in a not-so-rare standoff in Washington, D.C.
Senate Republicans are holding out for spending cuts from President Joe Biden and the nation's debt limit hangs in the balance. It has to be raised, leaders say, to avoid a U.S. default on its obligations, which in turn could lead to an economic slide into a dark place. Will it go to the wire? By the time this column is printed, hopefully it's resolved.
Either way, the point is that the political interference in financial matters is on stark display. We should be used to it by now. Laissez-faire capitalism still exists, of course, but a huge government bailout operation has been ongoing, much of it seemingly unavoidable, since the pandemic. The Committee for a Responsible Federal Budget puts the total of government pandemic relief at $7.1 trillion, including quantitative easing. On recent bank failures, Fortune magazine reported in March that a pair of failed banks had borrowed about $300 billion in emergency funding, mostly to pay off depositors. Laissez-faire purists have called for no such help. They argue private businesses should rise and fall on their own.
But bank failures, pandemic bailouts and a federal debt limit crisis can trigger government responses, as such scenarios could be serious threats to the stability of the U.S. and world economies.
Economies in most places are already buffeted by a series of incredible happenings: war, pestilence, instability, inequality and a massive migration of peoples across the world to foreign borders to find some way to make a living or simply survive.
Contrast that to many U.S. states, including New Mexico, experiencing record or near-record-low unemployment. New Mexico's rate is at 3.5% — where it's been holding for a couple months. The disparity of the many state and national economic indicators — some good, some bad — should be a source of optimism because it shows trends are moving in different directions, not just down.
Speaking of optimism, it's been high among those who think the Fed is done raising interest rates. The benchmark rate target range is now 5% to 5.25%. The Financial Times reported that bond traders and futures traders are going back and forth in their predictions about the next Fed move. There is another view out there: that the Fed should rethink things. In a recent interview with the Albuquerque Journal, Wall Street Journal editor Emma Tucker mused on whether the 2% inflation target the Fed favors is even realistic anymore.
"No one would dare say this," Tucker said, "but the 2% target might start to look unrealistic. I hope the inflation peak has been reached, but as to how far down you can get it, I don't know."
What we do know is that there are solutions to the ever shifting economic issues facing the states. They can be solved . . . but for the politics.
Inside today, we have much to share, but one highlight is our new feature announcing business openings and closings — with a map of the locations. And staff writer Kevin Robinson-Avila weighs in to take us into the world of tech startups with the story of a New Mexico firm that took top honors for its high tech, useful and usable innovations.
Until next time.