Economic Signals Point to a 2013 Recession; The latest numbers for durable goods and personal income send an alarming message. Will it be heard?
Data released this week by the Commerce Department waved bright red recession flags--orders for durable goods fell 13.2% in August and inflation-adjusted personal income fell 0.3%. President Obama is asking for more time to allow the lackluster recovery to pick up steam. His plan is to move the economy "forward" by keeping the current policy framework in place and adding higher tax rates on income and capital gains. But the new Commerce Department numbers, combined with his stay-the-course approach, point to recession in 2013.</br></br>This administration's economic policy is built on deficit spending, government control over the economy and dependence on the Federal Reserve to buy the government's excess debt. These policies aren't working. They discourage private investment and jobs, and the policies have resulted in high unemployment, weak business confidence and rapidly declining median incomes.</br></br>The signature of our times is the fever for investing in government bonds and $1,700-an-ounce gold rather than in job creation and small businesses. That is the market's response to Obama administration efforts to reverse core American principles of growth and prosperity.</br></br>These principles include a sound dollar to provide price stability and to attract capital; a commitment to limited government as a prerequisite for higher living standards; a preference for low tax rates to encourage investment and hiring; and a belief that markets can set prices and allocate capital better than governments.</br></br>The administration will have spent more than $14 trillion in just four years and added $6 trillion to the national debt. The Federal Reserve has dramatically expanded its role in the economy and markets, practically creating a new branch of government. Its near-zero interest-rate policy favors government, the world's biggest borrower, at the expense of private-sector savers. The Fed's heavily leveraged purchases of government bonds work against the market-based allocation of capital that is a key driver of economic growth. The Fed has now promised to make unlimited future purchases of government debt if job growth remains weak, an affront to the principle of limited government.