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Downgrading the Economy

Consumer confidence, housing prices down; deficit, health care costs up

• January 31, 2012 5:14 pm

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A series of reports on Tuesday threw into stark relief the uncertain state of the American economy and of Barack Obama’s presidency.

The Congressional Budget Office (CBO) projected that the U.S. fiscal deficit will reach $1 trillion for the fourth straight fiscal year. The CBO also estimated that government spending on health care will rise to $1.8 trillion, or 7 percent of gross domestic product, by the year 2022. That figure, however, presumes Congress will not block a scheduled cut to doctors’ payments under the Medicare program. If the cut fails to pass, then government spending on health care will rise even higher.

While the deficit and government health care spending continue to rise, consumer confidence and real estate prices continue to fall. The Conference Board reported Tuesday that its Consumer Confidence Index (CCI) fell 3.7 points over the last month, from 64.8 in December to 61.1 in January. The index is a measure of consumer sentiment toward the economy. A rating of 90 or higher signifies a "healthy" economy, according to AP. The CCI has not approached 90 since the Great Recession began in December 2007.

The weakness of the economy is a major obstacle to President Obama’s campaign for reelection. In a recent report, the Federal Reserve cited the housing market as a drag on recovery. Yet the drop in home prices shows no sign of slowing despite numerous federal programs to aid homeowners. The latest Standard & Poor’s/Case-Shiller index of home prices showed declines of 1.3 percent in November 2011. That is the third straight monthly decline and the index stands barely above its crisis-era lows.

President Obama’s approval rating on economic issues stood at 40 percent in the most recent CBS News/New York Times poll.

Published under: Obama Economy