The following editorial appeared in The Washington Post on Oct. 27:
The U.S. economy grew at a better-than-expected, but still sluggish, rate of 2 percent between July and September. Among the factors that contributed to growth were higher consumer spending and defense spending. Among the factors that retarded growth were a drop in net exports due to slowdowns in Europe and China, and — alarmingly — a 1.3 percent decline in nonhousing business investment, the largest such quarterly drop since late 2009.
What’s worse, the slump in investment likely reflects declining private-sector confidence traceable to Washington’s inability to get control of the nation’s finances. Businesses are reluctant to put their capital at risk and Americans back to work unless Congress and the White House can banish the specter of massive tax increases and spending cuts set to take effect on Jan. 1.
You haven’t heard too much about this “fiscal cliff” from the presidential candidates. President Barack Obama alluded to it in a recent interview with the Des Moines Register, calling it a “forcing mechanism” for a broader fiscal compromise. But this mention was the exception that proves the rule: Obama made these remarks in a conversation that was originally off the record, and it was revealed only after the editor complained about those ground rules.
The cliff consists of a combined $560 billion of tax increases and spending cuts — the latter skewed heavily toward defense. Economists generally say that this sudden withdrawal of money from the economy would plunge the country back into a recession, though there is disagreement over just how deep that recession might be. The Congressional Budget Office suggests a 4-percentage-point drop in gross domestic product.