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It also shows the dangerously schizophrenic nature of our economy. As long as Congress remains too dysfunctional to keep parks open, let alone craft a real growth strategy for the country, the Fed has to play the role of economic stimulator of last resort, and banks, hedge funds and money managers have to play along. As Atwater points out, they are now using record levels of debt and leverage to buy up stocks, since the Fed's money dump keeps interest rates so low. (I'm reminded of former Citigroup CEO Chuck Prince's infamous line that "as long as the music is playing, you've got to get up and dance.") A recovery seen mainly in the financial markets and built on the shaky foundations of debt rather than income growth is not what the U.S. needs.
We may not be able to keep even that kind of recovery going much longer. Whether any federal workers are around or not to produce the next jobs report doesn't matter, because it's not the unemployment number we need to look at. It's the workforce-participation number, which is as low as it's been since women started entering the labor force en masse in the 1980s. Only 63% of the population are working--about the same as in the beleaguered euro zone. It's impossible to stage a robust recovery in an economy that depends heavily on consumer spending when so few people are getting paychecks.
And therein lies the real debt conundrum. The battles over spending limits and debt ceilings have nothing to do with the state of our public finances. They've actually improved in the past year, thanks to the sequester cuts that resulted from the last round of partisan budget battles. But ironically, those cuts, along with the continued political squabbling, have created a situation in which we have a weaker dollar, slower growth and a recovery that isn't creating enough jobs to hold the percentage of working Americans steady. Too bad Congress isn't eligible for furloughs.