The technical argument about whether the U.S. economy is heading into a recession is meaningless to ordinary Americans.
If you’re having trouble paying your bills or know people who’ve lost their job and fear you’ll be laid off next, then it feels like a recession.
The president’s Council of Economic Advisers disagrees, of course, quibbling that a recession is defined as two consecutive quarters of negative economic growth while the U.S. economy actually eked out a small gain in the last quarter of 2007 to finish up by 2.5 percent over the year.
But of more relevance to working Americans, the unemployment rate edged up to 4.7 percent in the third quarter and to 5 percent by December. That’s low by historical standards but enough to make the 95 percent of us who still have jobs worry if we’ll be the next to get pink slips.
Congress and President Bush clearly cared more about the worries of ordinary citizens than the ruminations of statisticians. At Bush’s behest, Congress passed a $168 billion “economic stimulus” package — financed entirely by borrowed money.
The key feature of that package is rebates of up to $1,200 to couples earning less than $150,000. But don’t count on people rushing to spend that cash. In a recent poll, just 21 percent of respondents said they’d spend the rebates on new stuff. The rest said they’d pay off existing bills or put the money in savings.
Less publicized portions of the package, including accelerated depreciation rules for business, may have a more fruitful long-term economic benefit by promoting investment in more productive equipment.
Those incentives for business investment likely will cause a short-term loss to Colorado’s state government, because our corporate income tax is linked to the federal rules. Mike Mauer, chief economist for the Colorado legislative council, estimates the changes in business depreciation rules will reduce state corporate tax collections by $57 million over the next year. Some of that loss, perhaps $20 million, will be offset — ideally — by increased sales taxes as residents spend their rebates.
Regardless of whether the national economy is slowing down, there is so far no evidence that similar lethargy is affecting Colorado, according to state Treasurer Cary Kennedy. For December, the state had projected $607.1 million in total tax revenue but actually received $618.8 million. The most important index of consumer spending, sales taxes — depressed in 2006 by the Christmas blizzard — were projected at $112.8 million this year but actually came in at a brisk $158.4 million, $45.6 million above projections.
One strong Christmas retail season does not an economy make. But it’s possible that some factors helping drag down the national economy, notably rising energy prices, are helping Colorado by spurring development of natural gas and other resources as well as boosting our nascent alternative energy industry.
Here’s hoping our luck holds.
