A deal reached in Washington to raise the debt ceiling and cut federal spending won’t have as big an impact as many think.
Creighton University Economist Ernie Goss says the protracted fight in Washington didn’t really change spending all that much. He says the budget cuts will merely slow federal spending growth by two percent, from 9% growth to 7%. He says such growth far outpaces the personal income growth of taxpayers.
Goss will be watching closely the numbers from the jobs report that comes out tomorrow. He says an uptick in the national unemployment rate could signal the beginning of a double-dip recession.
“If that number is very grim, meaning negative job losses for July and an unemployment rate that kicks up from 9.2 where it is now to something higher, I think the likelihood of a double-dip recession, moving back into recession, goes up quite significantly,” according to Goss.
Goss doubts whether the federal government will cut back on spending. He’s confident Congress will repeal the tax cuts enacted during the Bush Administration, which he says will be drag on an already weak economy.
“They will expire for everybody, not just the supposed rich. They’re going to expire for everybody,” Goss says, “and that’s 3-and-a-half trillion dollars more in federal tax collections over a ten year period.”
Goss says the economy in the Midwest has been bucking the national trend, but still has slowed. He worries the national economy might fall into negative territory next quarter.