RISKS TO A RECOVERY: Positive Trends in February Jobs Report - Barrons.com

Positive Trends in February Jobs Report - Barrons.com

It’s hard not to see the US recovery in part as a house of economic cards built on huge amounts of government debt.

Debt that could be curtailed by cutting back government spending – but we are talking entitlements and clearly Obama believes everyone is entitled to as much healthcare, etc. as the government can provide for free (see the latest Government ruling on California’s request to charge an extremely modest co-pay for doctor visits and prescriptions under Medicaid).

We know a family living on credit cards to supplement their income (we are talking here of roughly a 40% fillip) can often feel flush. Greece and much of sovereign Europe are finding out the limits to borrowing – is the US all that different?

So, things could be done to reduce government spending, but things aren’t being done; and, as now frequently being talked about, 2013 will bring about tax increases. And, to Democrats, this just means more tax receipts. To economic cognoscenti, higher taxes tend to provide diminishing returns (look at Illinois and Maryland as recent examples).

Then, of course, there is the evidence from Europe where budget gaps were closed with higher taxes and economic growth becomes even more of a non-starter.

Yes, things could change; but, Southern Europe shows how economies built on debt don’t last. Democrats are hoping that ‘this time it’s different’. And, it would be hard to not to have to accept that all the Republican presidential candidates have some serious flaws.