Through most of the year, the U.S. economy struggled to find a footing. The unemployment rate hovered at or near nine percent for much of the year, but dropped to 8.6 percent in November. The numbers for December are due to be announced on January 6.
The economic debate about federal government deficits and debt and whether to raise taxes and cut spending continued. There were arguments that further government stimulus is needed to prod recovery to the economy.
Events were not as dramatic as two years ago, and certainly not as dramatic as 2008, but 2011 had its share of confrontations. In chronological order, here is my list of top 10 events on the economic front for 2011.
April 5, the Paul Ryan budget. Congressman Paul Ryan (R) Wisconsin, House budget chairman, proposed a budget for the United Statesthat would reduce the deficit by $4.4 trillion over ten years. The Ryan budget plan would repeal the health care law signed by President Barack Obama in March of 2010, make sweeping changes to Medicare and Medicaid, cut the military budget, and impose caps on domestic spending. While it is doubtful that the Ryan budget would become law, some of the ideas expressed in the budget contributed significantly to the debate.
August 2, U.S. debt ceiling raised. After much posturing that put the U.S.on the brink of a default, President Obama and Congress reach a deal for what should have been a routine move to raise the U.S.government debt ceiling. In remarks in the Rose Garden after signing the bill, Obama said, “It’s an important first step to ensuring that as a nation we live within our means.”
August 5, United States credit rating downgraded. The United States loses its perfect credit rating as Standard & Poor’s credit rating agency reduced the U.S. rating from AAA to AA+.
September 2, Federal Housing Finance Agency sues 17 Firms that issued mortgage backed securities. Giants of the financial landscape like Bank of America, Citigroup, Deutsche Bank, Goldman Sachs, JP Morgan Chase, Merrill Lynch and Morgan Stanley are included. FHFA is seeking compensatory damages for negligent misrepresentation of mortgage backed securities sold to Fannie Mae and Freddie Mac. The following December, the Securities and Exchange Commission would bring charges of fraud against six former executives of Fannie Mae and Freddie Mac.
September 17, Occupy Wall Street protest movement begins. Crowds gathered in protest against growing inequality and the depressed economy. Hundreds of protestors camped out in Zuccotti Park in New York City’s Wall Street financial district. The protestors slept in tents and under tarpsduring the night. During the day they hung banners and signs and rallyed against inequality in America. The movement spread to other cities in the U.S. during the year.
October 11, data show that inequality increases.The Congressional Budget Office finds that, between 1979 and 2007, income grew by:
- 275 percent for the top 1 percent of households,
- 65 percent for the next 19 percent,
- Just under 40 percent for the next 60 percent, and
- 18 percent for the bottom 20 percent.
November 23, the Congressional “super committee” fails. Made up of six Republicans and six Democrats, the committee charged with the task to come up with a plan to “fix” U.S.long term debt by making changes in programs like Social Security and Medicare and by increasing federal revenues failed to resolve differences and did not present a plan to Congress. This could lead to automatic cuts in 2013, including large cuts in defense spending. More likely, it will continue battles between Republicans and Democrats throughout the 2012 election year.
November 29, Standard and Poor’s downgrades credit rating of American banks, upgrades Chinese banks. Bank of America’s, Goldman Sachs’ and Citigroup’s Standard and Poor’s long-term credit grades were reduced from A to A minus. The credit rating agency also downgraded the status of Morgan Stanley and J.P Morgan. The agency simultaneously raised the ratings for three Chinese banks, making them better credit risks than most large American banks.
December 9, Britain says no to a proposed changes in the European Union treaty designed to add fiscal discipline to nations in the political union. This moves Britain further from the other nations in the pact. If changes to the European Union treaty fail, it could mean the end of the Euro. If Europe can’t solve its crisis, which has several nations facing the brink of default on debt, it could lead to further world economic woes, including dimmed prospects for U.S.recovery to full employment.
December 23. The payroll tax cut is extended for two months. In a move to continue stimulus to the economy and to add to worker paychecks, the payroll tax on workers wages that goes towards funding Social Security was cut from 6.2 percent to 4.2 percent in December 2010. The latest move by congress extends the cut for the first two months of 2012. In February, Congress will fight over continuing the tax cut through the remainder of 2012.