A Nebraska economist credits an overly aggressive Federal Reserve for driving the Dow Jones industrial average to record highs.
Economist Ernie Goss with Creighton University says the Federal Reserve has been keeping interest rates extremely low through the purchase of $3 trillion in United States debt, mostly through the purchase of Treasury bonds. Goss says investors have had to turn to the stock market to get any sort of return on their investments.
“To quote former Sen. Alan Simpson, what it has done is stocks are now just the healthiest horse in the glue factory,” Goss tells Kevin Thomas, host of Drive Time Lincoln on Nebraska Radio Network affiliate KLIN.
The Dow Jones industrial average this week broke through the high-water mark set five years ago and is still climbing, pushing past 14,300, a major rebound from the lows it hit in 2009 at the depths of the recession.
Goss says the economy continues to limp along, though housing seems to be making a rebound.
As for the sequestration that went in effect at the end of last week, Goss says neither side is being honest about its effect. He says President Obama has overstated its impact, but House Republicans have understated it.
Goss says the automatic across-the-board cuts will not take place without pain. He adds, though, it is needed pain that still won’t resolve the country’s budget woes.
“We’re still going to have a deficit this year of between $800-900 billion. Four years in a row now, we’ve run deficits averaging over $1 trillion. We’ve got to begin bringing that down and this is at least a small step in that direction,” Goss says.
The continual battles between President Obama and House Republicans have given rise to a new term in Washington: crisis fatigue.
But Goss says everyone suffers during crisis fatigue.
“It’s fatigue for everybody except economists. George Bush had No Child Left Behind. Well, this has been no economist left behind. We’re as busy as we can be talking and arguing about this,” Goss jokes. “But, what we’ve got is a failure of leadership and it’s both Republicans and Democrats.”
Kevin Thomas, KLIN, contributed to this report.