Slow growth is shuffling the deck

Rana ForooharTime

When it comes to the economy, a single percentage point changes everything, said Rana Foroohar. Economic growth has been below 2 percent so far this year, a vast difference from the more than 3 percent growth many economists were predicting late last year. The slowdown’s causes range from higher food and oil prices to parts shortages resulting from the Japanese earthquake, “but the bottom line is that the 2 percent economy is reshuffling the deck on everything from the debt debate to job growth to the likely outcome of the 2012 elections.”

Stronger growth would generate fatter tax receipts and ease the debt burden, reducing the need for “excruciating conversations about cutting Grandma’s health benefits.” Consumer spending fell to a six-month low in May; a higher rate would convince employers to stop sitting “on their $1 trillion pile of cash” and hire some workers. Lower growth doesn’t just scramble Washington’s electoral calculus but also heralds “an era of even more divisive, populist politics.” That is just one face of a slow economy’s worst attribute: Its negative effects “tend to snowball.”