The week ahead

Tom Hudson: Congress dithers, household prosperity withers

 

Special to the Miami Herald

The eve of Obamacare, a showdown over a government shutdown, and the threat of a debt default all are ahead for investors. While those issues are rife with politics, each of them poses economic risks that can’t be ignored.

The headwind of rising healthcare costs threatens to zap consumer spending even while broadening health-insurance coverage brings with it the opportunity to provide a more sustainable health system.

Massive

The beginning of open enrollment for the state health insurance exchanges under the Affordable Care Act is a massive, real-time economic experiment.

The economic goal of having more Americans with health insurance is not controversial. How that is paid for is. And if the money will come from someplace.

Meantime, the slowdown of government spending remains an economic drag. That’s not necessarily an argument for more.

After all, corporate profits and the stock market have been setting records even as the sequestration cuts have taken hold.

But household income levels are stagnant. That may be part of the warning the Federal Reserve has been very clear about: “Fiscal policy continues to be an important restraint on (economic) growth.”

There’s the direct impact from less spending, but more important is the lack of clarity and absence of a comprehensive strategy.

While Congress dithers over spending compromises, household prosperity withers.

Preludes

These are preludes to the financial fight over borrowing.

The nation’s credit limit is maxed out. Without Congress approving an increase to the debt ceiling, bills won’t get paid and the fiduciary reputation of America will get dinged.

Again.

There will be threats of a lower credit rating and higher interest rates. But the real risk of not raising the debt ceiling is the manifestation of the real and growing threat that political dysfunction costs us all.

Tom Hudson is a financial journalist. He hosts The Sunshine Economy on WLRN-FM in Miami. He is the former co-anchor and managing editor of Nightly Business Report on public television. Follow him on Twitter @HudsonsView.

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