The road to economic recovery

By The Gazette Editorial Board

Congress did not extend unemployment benefits for the 1.2 million Americans who ran out of that temporary assistance at the end of June. We think that was a mistake.

At the same time, Congress must refrain from indulging calls for additional major stimulus spending. Its focus should be on helping - or at least allowing - businesses, especially small and medium employers - to grow and create the jobs that our economy and people badly need.

Our still-fragile recovery from the deep recession that began in late 2007 certainly is a difficult balancing act between stimulus spending and too much debt. Pulling the plug too soon on jobless benefits when the jobless rate is still running at nearly 10 percent could well be counterproductive. Such public assistance is a basic safety net and quickly spent into the economy.

The latest proposal would have added about $33 billion to the budget deficit over 10 years, according to the Congressional Budget Office. That's serious money but pales in comparison to the hundreds of billions in previously approved stimulus money still in the pipeline.

We are leery of another round of extensive deficit spending. The national debt is more than $13 trillion and is projected to top 90 percent of our gross domestic product - GDP, what we produce in goods and services - for fiscal 2011. That's the highest level in history other than the end of World War II.

Our colossal debt today has raised fears of hyperinflation or deflation. A growing number of economists also are warning of a double-dip: The current recovery will be followed by another major recession in 2011. Europe's and other countries' debt problems, the $1 trillion U.S. indebtedness to China, the threat of higher tax rates and a continued tight lending environment are seen as recovery obstacles.

All of this debt and fear shakes our collective confidence. American businesses are hoarding more cash than any time in the past 40 years. In the second quarter, the 500 largest non-financial U.S. companies held back nearly 10 percent of their assets, according to a Wall Street Journal analysis. The trend appears to have increased in the third quarter.

Jacking up tax rates and more and more deficit spending won't get us to long-term recovery. Many Americans need a job that pays their bills and allows some discretionary spending.

Most new jobs are produced by small and medium-size businesses. They can't create those jobs if they're being choked by higher taxes and overregulation.

Triggering the private sector to invest more in expansion and job creation is critical. It would generate more tax revenue. And if Congress becomes more fiscally responsible, it could put us back on track to shrinking the onerous debt that threatens to shackle our economy and people for decades.