Economy IS improving. Don't mess it up, Congress!October 17, 2012: 12:41 PM ET
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
The U.S. economy has been slogging along at a sluggish pace for several years. I've been referring to the post-Great Recession period as the barbecue recovery since 2010. It's been low and slow.
But even conspiracy theorists like Jack Welch would have to admit that the economy is finally beginning to show some faint signs of life. (To quote Paul McCartney, you have to admit it's getting better. Then again, to quote John Lennon, it couldn't get much worse.)
Consumers are spending more. Many retailers are ramping up hiring plans for the holidays because they expect strong sales in November and December. Inflation, once you throw out the recent spike in gas prices, is still relatively tame.
The housing market has finally bounced off the bottom. Sales and prices are up. Builders are seeing more demand and so are banks -- with the notable exception of Citigroup (C), who seems to be the Eeyore of the housing recovery. (It's my birthday and I can't find my refi boom.)
And even though the validity of the unemployment rate has been in dispute lately, the job market is clearly in better shape now than a few years ago.
I could go on with more economic facts and figures. One might say that I've got binders full of ... wonky statistics. But all this relatively good news will be for naught if Congress mucks it up by pulling a Felix Baumgartner. The economy may be about to take a 24 mile-high jump into the fiscal cliff.
Although there has been notable improvement in housing, retail sales, jobs and the stock market this year, many experts still think that the recovery is extremely fragile.
The economy is simply not growing quickly enough to withstand the shock of massive budget cuts and higher tax rates that would come about if lawmakers are not able to come to an agreement before the end of the year to avert the fiscal cliff. Without a deal, many economists think the U.S. could be back in a recession in 2013.>
"When you look at the numbers, the thought of going over the cliff is not super appealing," said David Abuaf, chief investment officer at Hefty Wealth Partners in Auburn, Ind. "Nobody wants this to be a 10-year recovery."
Abuaf said that many investors are still skeptical about the economy. So failure to solve the fiscal cliff issues before the end of the year could have disastrous consequences on the financial markets. Investors may be waiting for inaction by Congress as an excuse to sell.
Fortunately, Abuaf (like many experts) believes that Congress won't take a blind step off the cliff.
"You always have hardliners. Congress always moves at the 11th hour. That's politics," he said.
But merely coming to some sort of fiscal agreement won't be sufficient to prevent a slowdown next year. It needs to be the right kind of deal, i.e. a permanent one and not yet another stopgap measure that kicks the proverbial can down the road.
Steve Blitz, chief economist at ITG Investment Research in New York, says consumers and business leaders want resolution about tax rates for good instead of needing to worry about another new deadline.
"The issue for the fiscal cliff won't be the impact on growth per se. It's the uncertainty about what's going to be done on taxes for individuals and corporations," Blitz said. "Lawmakers are going to yell and scream and it will be great theater. There will probably be some agreement. But people can't make decisions until they know what the rules of the game are going to be."
And that would be a big problem for the entire world. Keep in mind that Asia and Europe are not exactly healthy. The U.S. might be able to help pull the rest of the globe out of the current economic slump -- or at the very least minimize the pain. But that's only if we don't wind up with a spending paralysis that leads to another recession.
"There is a slow implosion in Europe and a slowdown in China. The fiscal cliff just complicates the global picture further," Blitz said.
So there you have it. Election Day is less than three weeks away. Once the partisan dust settles and we know what the makeup of Congress looks like and whether or not there will be a new inhabitant of the Oval Office, it will be time for politicians to stop being politicians and actually be leaders for once.
Otherwise, there will be hell to pay for all lawmakers if we're still talking about why the economy hasn't recovered by the time the 2014 mid-term elections roll around.
I asked my Twitter followers to identify the subject of that book. Forbes markets editor Steve Schaefer won the challenge.
I remember the no-hitter too. Sadly, the current Yankees could use Abbott ... as a hitter ... despite the fact that he hit .095 in his one season in the National League with the Brewers.