Federal government should tackle deficit to boost confidence

Uncertainty.

University of Colorado economist Richard Wobbekind used that word often in a recent press release detailing sentiments of Colorado business leaders about the national economy.

Wobbekind was referring to the Leeds Business Confidence Index, prepared through CU’s Leeds School of Business. The Leeds survey found that, while Colorado business leaders are somewhat optimistic about their own companies’ profitability — as well as hiring prospects and capital expenditures — they are much less confident about the national economy.

“The overall economy has been damaged by uncertainty — the uncertainty of consumers about the strength of the recovery and the strength of the job market and the uncertainty of businesses about demand for their products — and I think that uncertainty has worked its way into our index and other national indexes,” Wobbekind said in a press release.

The index recorded an overall score of 51.6, down from 56.8 at the beginning of the second quarter. But confidence in the national economy plummeted, to 44.0 from 53.6. Confidence in the state economy fell to 51.2, from 55.5 the quarter before.

Many factors likely are causing concern among business leaders, especially when looking at the national economy — continued weakness in the real estate market and other negative economic signs among them. But we would suggest another issue that likely is weighing on business leaders’ minds: gridlock over the federal budget and the debt ceiling.

The nation’s $1.5 trillion annual budget deficit is unsustainable and must be addressed. The Congressional Budget Office projects that the federal debt — the accumulation of deficits over the years — will reach 70 percent of gross domestic product by the end of this year, up from 40 percent at the end of 2008.

Uncertainty — there’s that word again — over the debt ceiling is just one thing making business leaders skittish. They also want to know that lawmakers, President Obama to leaders in the House and Senate — will do what is necessary to restore fiscal sanity. A deal to curb the deficit, with spending cuts and, yes, revenue increases, would send an enormously positive signal and might just help remove the first two letters from an oft-repeated word.

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