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Analysis: Is Congress hurting the economy?

Sep 5, 2011, 10:13 p.m.
The Capitol dome and Senate (R) in Washington, August 2, 2011. REUTERS/Jonathan Ernst

By Andy Sullivan

WASHINGTON (Reuters) - With the economy facing a heightened risk of sliding back into recession, the country's elected representatives may be pushing it closer to the brink.

Democrats and Republicans say job creation is a top priority as they return to work this week, but there is a growing body of evidence that Congress is actually hurting the economy.

A protracted budget stalemate in the first half of the year caused nervous federal agencies to sit on billions of dollars that should have been circulating through the economy.

A vitriolic debate over raising the debt ceiling this summer spooked consumers, caused turmoil in financial markets and led to a first-ever downgrade of the United State's credit rating by Standard & Poor's.

A spat over subsidies for rural air services in late July idled airport construction projects across the country and threw thousands temporarily out of work for several weeks.

Businesses that had to suspend their airport construction projects are still trying to recover from the disruption.

In Wilkes-Barre, Pennsylvania, the Daniel J. Keating Co. has had to rebuild a partially built access road that washed away when they were forced to suspend work. The company is also trying to reschedule product deliveries and safety inspections and round up subcontractors who had moved on to other projects, said company treasurer Joe Maloney.

"I don't think they have any appreciation about what's going on out in the public," Maloney said of Congress. "They seem to be totally ignorant of how this economy is driven by employment."

Maloney's disgust is widely shared. Congress' public approval rating tied its record low of 13 percent in a Gallup poll in August, while those surveyed by the Pew Research Center used words like "ridiculous" and "childish" to describe the wrangling over the debt ceiling at its height in late July.

"I cannot recall an instance where voters were so demoralized," said Greg Valliere, chief political strategist at Potomac Research Group. "The debacle in late July seemed to reinforce a sense of resignation, not anger, that everyone in Washington is incompetent and recklessly partisan."

POLITICS INFECTING THE ECONOMY

Those bad feelings aren't just confined to cable TV news talk shows and Internet message boards.

Standard & Poor's cited the political environment as a primary reason for its decision to downgrade the country's credit rating. Stocks plunged after the downgrade, battering consumers' retirement holdings.

U.S. consumer confidence fell in August to its lowest level since the 2007-2009 recession. Some economists, businesses and pollsters say the debt-ceiling debate was a major factor.

"This collapse of economic confidence is not an independent event driven only by economic reality," Republican pollster Bill McInturff wrote in a blog post. "This sharp a drop in consumer confidence is a direct consequence of the lack of confidence in our political system and its leaders."

With consumers inclined to hold off on big purchases, that could spell trouble for manufacturers of durable goods like automobiles and refrigerators -- raising the risk of a double-dip recession.

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