Without robust growth, the economy is more vulnerable to negative shocks, which unfortunately seem to keep coming. It is like riding a bicycle—at a slow speed, the bicycle wobbles and the risk of falling rises. Politics here and abroad have not helped. The intense debate around raising the debt ceiling and the subsequent downgrading of the federal debt took a toll on household and business confidence. More recently, the difficulties in Europe, along with lower U.S. growth prospects made investors less inclined to take risks. So, we saw a major stock market sell-off and widening credit spreads. All these events increase the downside risks to the growth outlook.
[Tag: Escape velocity]