Washington's Last Hope to Prod Economy

Stimulus, easy money, tax relief -- all done with. So what kind of debt deal can really put us on the right track?

Washington has only one course left to give the sluggish economy a badly needed shot of adrenaline: to hammer out a credible plan to pare back the long-term deficit. With the recovery at a plateau and housing still in a deep slump, economic growth has slowed to a crawl. And job creation still is weak. Although few analysts expect a second recession, economists are downgrading their forecasts, predicting that output will stay sluggish all year — and possibly through 2014 or later.

What’s more, public disillusionment over the pace of the two-year-old recovery, combined with widespread worry over the massive federal budget deficits being projected for the next decade, has spawned growing uncertainty and a lack of confidence about the outlook. Both consumers and businesses are holding back, waiting to see whether the economy will get better or worse before committing to hiring and purchasing decisions.

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Art Pine
Contributing Editor, The Kiplinger Letter