With today’s jobs report out, it’s worth remembering that back during the lame duck session, the Fix the Debt crowd was constantly braying about the dire consequences of failing to reach a major budget deal. They said that not only would full implementation of the cliff be a Keynesian drag on the economy but also that fire and brimstone would rain down upon us if markets weren’t assured that Congress has a credible plan to tackle long-term fiscal challenges.
Well, Congress had no plan. They agreed to small tax hikes and a bit of new stimulus via unemployment insurance, randomly kicked the can on the sequester, did nothing to reform the tax code and nothing to settle entitlements. And everything’s … fine.
Not great, mind you. But a January jobs report showing normal growth, no bond market freakout, no interest rate spikes, and some nice upward revisions to data from the lame duck period. Uncertainty didn’t matter. Confidence didn’t matter. Strong fundamentals and decent monetary policy from the Federal Reserve have us on a track for O.K.-but-not-spectacular growth, and you should expect that to continue.