Wal-Mart, for example, has a small army of people who can deal effectively with the changing regulatory environment. Mom & Pop’s Sodas and Sundries probably doesn’t.

Anxious investors can take heart: Congress’s August recess begins at the end of this week, which has historically been a good thing for the markets. Michael Ferguson and Hugh Douglas Witte found that “about 90% of the capital gains over the life of the Dow Jones Industrial Average have come on days when Congress is out of session.” The finding could of course be a fluke but Ferguson and Witte found the relationship to be particularly strong when Congress’s approval ratings are lower. They point out that when Congress is in session, companies and investors face “a more uncertain tax and regulatory environment.”

And while characters in novels may improve their lives immeasurably when they learn to stop worrying about what other people think and just be true to themselves, this is not a life path that is open to political figures.

Politicians are in charge of the modern economy in much the same way as a sailor is in charge of a small boat in a storm. The consequences of their losing control completely may be catastrophic (as civil war and hyperinflation in parts of the former Soviet empire have recently reminded us), but even while they keep afloat, their influence over the course of events is tiny in comparison with that of the storm around them. We who are their passengers may focus our hopes and fears upon them, and express profound gratitude toward them if we reach harbor safely, but that is chiefly because it seems pointless to thank the storm. (p. 25)

What you need to realize is that the CBO is the servant of members of Congress, which means that if a Congressman asks it to analyze a plan under certain assumptions, it will do just that – no matter how unrealistic the assumptions may be. CBO will tell you what’s going on, but it will do so deadpan, doing nothing in terms of emphasis or placement to highlight the funny business.

If consumers do not want to spend, and businesses do not want to expand, there is not a damn thing the Fed can do about it.

Looking ahead, there is no driver for jobs. Moreover, states are in forced cutback mode on account of shrinking revenues and unfunded pension obligations. Shrinking government jobs and benefits at the state and local level is a much needed adjustment. Those cutbacks will weigh on employment and consumer spending for quite some time. Expect to see structurally high unemployment for years to come. Keep in mind that huge cuts in public sector jobs and benefits at the city, county, and state level are on the way. These are badly needed adjustments. However, economists will not see it that way, nor will the politicians.