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The One Big Risk That Could Derail The U.S. Economy

Lauren Lyster
The One Big Risk That Could Derail The U.S. Economy

Hundreds of thousands of people have been losing their healthcare coverage in the past few weeks. President Obama in a speech Wednesday said “bad apple” insurance companies, not the Affordable Care Act, are to blame for that, as the administration scrambles to fix technical problems with the Healthcare.gov insurance exchange.

Related: Obamacare: Separating Truth from Fiction - Here's What You Need to Know

But is uncertainty stemming from Obamacare just the latest fiscal headwind blowing in the economy’s face?

Related: Obamacare Could Mean Steep Rate Hikes in These Four States

Ward McCarthy, managing director and chief financial economist of the fixed income division at Jefferies, says yes. But it’s really just the latest example. McCarthy sees fiscal policy as “the single biggest impediment to the U.S. economy.”

“If you look at corporate balance sheets, they are in great shape,” he tells The Daily Ticker. “Consumers have been doing a good job of getting their balance sheets in line. We continue to see job growth. So the economy is poised to grow a lot faster, but what we need to do is unleash all this potential economic energy to get the obstacles out of the way and unfortunately most of those obstacles reside in Washington.”

Related: Gullible Americans Fuel Obamacare's Bad Rap

In McCarthy’s view, Washington should not have raised taxes this year (the payroll tax cut expired at the beginning of the year). And he believes while the government needs to reduce spending in the long term, it shouldn’t be cutting spending in the short term.

So what is really holding back the economy’s potential when you talk about Washington? Is it the actual tax increases and blunt cuts from the sequester or the nebulous impact of uncertainty stemming from budget fights? Check out the video to see what the actual data indicates, according to McCarthy.

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