Ben Bernanke and the Federal Reserve seem to have run out of ammo. It's gridlock as usual for Congress. States and cities are cutting spending and shedding jobs.
Is it time for the spender of last resort — the American consumer — to put a prop under the economy?
Spending per shopper over the post-Thanksgiving weekend was set to pop by 9.1 percent compared with that of the same period last year, according to a survey by the National Retail Federation. Store traffic was up 6.6 percent, and the federation says average outlays per shopper were $399, up from $365 last year.
ShopperTrak, a consumer-spending research firm, also reported positive results, with Black Friday sales rising 6.6 percent and traffic rising 5.1 percent. On Monday, International Business Machines estimated that online "Cyber Monday" sales would rise 20 percent compared with those of 2010.
"Consumers are actually doing their part for the economy," says Nariman Behravesh, chief economist for IHS Global Insight in New York. "They've still got high debt levels. Some of them have underwater mortgages. But they're doing OK."
Sure, retail spending dispatches immediately after Black Friday are almost always positive. On Dec. 1, 2008, near the worst of the financial crisis, The New York Times reported: "Sales in the nation's stores were strong over the weekend, to the relief of retailers that had been expecting a holiday shopping period as slow as the overall economy."
Turned out that holiday shopping that year really was as slow as the overall economy — if going in reverse counts as "slow." Consumer spending for October through December of that year plunged by 5.1 percent, according to final figures from the Commerce Department. That was the worst quarterly result in more than three decades.
But last weekend's reports were better than expected and should at least keep the season from being a washout, says Mark Vitner, senior economist for Wells Fargo in Charlotte, N.C.
Thanksgiving weekend results are "usually a pretty good indicator of whether or not we're going to have a good season," he said. "When you get off to a strong start like this, it pretty much takes away the downside."
One factor in the spending increases is inflation. Consumer prices are almost 4 percent higher now than they were a year ago, the highest such spurt since before the financial crisis. So shoppers have to spend more to achieve the same gift and party "wow" factor.
The good news, say economists, is that higher prices haven't kept people out of the malls. The willingness of so many to pay $270 for a Power Wheels toy dune buggy may betoken a slow return of consumer confidence.
What the economy has lacked for three years is demand — the purchase of goods and services of all kinds that companies pay employees to produce. Demand equals jobs. Many on the left would like Washington to create demand by spending hundreds of billions in borrowed money on fixing old bridges, building schools and so forth.
Many on the right would like to try to induce demand indirectly by cutting taxes by hundreds of billions. Extra money in people's pockets, the idea goes, would cause them to spend.
Either attempted remedy would blow the budget deficit even higher, which is one reason they haven't been tried. (Sorry. Tax cuts don't pay for themselves, as many would have you believe.) The Federal Reserve, for its part, has tried to spur demand by cutting borrowing costs to historic lows. But it's impossible to cut rates below zero, and that's about where they are.
So that leaves consumers, who have performed far better than anybody had a right to expect in late 2008. After bottoming out in 2009, consumer spending surpassed its 2007 peak this year, even after accounting for inflation.
Consumers have been a major force in keeping the economy from another recession, and they've done it even as they rebuilt their depleted savings. After scraping zero during the housing boom, the savings rate was about 5 percent in the first half of 2011.
But they're hardly flush, what with falling home prices, a seesaw stock market, 9 percent unemployment and stagnant incomes.
"Spending can't grow faster than income growth over the long term," Vitner said. "It did that in the second half of this year," which meant consumers were dipping into some of their newly replenished, but still meager, savings.
Without faster growth, a substantial decline in joblessness and an increase in incomes, the kind of shopping we saw last weekend can't continue.
And faster growth won't come without a stimulus that's bigger than anything being offered by the usual suspects.
Sitting on $1 trillion in ready cash, U.S. corporations are in a better position to spark demand than the Fed, Congress and consumers combined. Until they start hiring in earnest, the shopping revival will have a limited engagement.