With unemployment continuing high, retail sales bopping up and down, and the housing market and foreclosure rates still dropping, it's hard to see where the President's claim that the economy is recovering comes from. The economic picture is far from clear, and multiple indicators show some stabilization, but those felt on the individual level (consumer confidence, under- and unemployment, the state of the housing market, etc.) are still deeply mired, that recovery is seen as, at best, very modest. Fears of a either a continued jobless recovery or a double-dip recession persist.
While the solution for some on the left is to increase stimulus spending to new heights, the failure to restrain spending, particularly spending which merely prolongs failed systems and bolsters government employment, will accelerate the growth in both annual deficit and the national debt. These will in turn hamper economic growth in both the near and long-term. The Federal Reserve, CBO, and the OMB have all expressed concern recently about the dramatic rise in both indicators over the past two years, and the lack of any real plan to control them. Indeed, the OMB's Mid-Session Review revealed the government's concern that deficits will continue to accelerate while unemployment remains high. Unusually, the report was released late Friday the 29th (a news-burying tactic), and came on the heels of Peter Orzsag's announced resignation following strong disagreements with the White House over deficit-reduction.
The real dangers of rapid, long-term increases in the debt, and dramatic increases in deficit-spending, compounded with a shift from a market-driven to a government-driven economy, have been clearly seen in Greece this summer. The CBO has warned repeatedly of the growing possibility of a debt crisis, a la Greece, here in the US. These trends were of course begun under the previous administration, and have been greatly accelerated under the current one. If we fail to come to grips with our spending and borrowing habits, belt-tightening will be the first style to last for decades.