A WSJ article told readers that the "fiscal cliff" has already caused damage to the economy. The piece began:
"The damage may already be done.
"Even if lawmakers manage to avoid most of the $500 billion in tax increases and spending cuts set to take effect this week, the risks to the U.S. economy have risen as consumers and investors recoil from Washington's latest budget spectacle."
That ain't what the data show. The piece trumpets the plunge in consumer confidence in December, while noting in passing:
"The research group (the Conference Board) said Americans' outlook for the economy 'plummeted' despite a positive view about current economic conditions."
Of course it is only the current conditions index that bears any relation to consumer spending. The expectations index is driven primarily by news reporting, like hysterical accounts of the implications of the fiscal cliff. It has virtually no relationship to spending.
Contrary to the implication of this piece, the Commerce Department reported that investment in capital goods, excluding aircraft, was up 2.7 percent in December and 3.2 percent in November, suggesting little concern about the fiscal cliff. While the stock market has been down somewhat in recent weeks, short-term fluctuations in the market have almost no meaning for the economy.
In short, we should all appreciate the WSJ's efforts to hype the fiscal cliff, but they should place them on the fiction page.
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