Automatic Earth riffs on this quote by Treasury Secretary Tim Geithner, speaking to the House Budget Committee on Wednesday (2/24/10):

Without growth, we cannot begin the process of restoring fiscal responsibility. . . . before the federal government can begin attacking soaring deficits and a massive national debt, it needs to increase jobs and ensure economic growth.

Calculated Risk points out housing (not existing home sales!) is historically the best leading indicator for the economy and unemployment, using Residential Investment (quarterly from the BEA’s GDP report), monthly data on Housing Starts and New Home sales from the Census Bureau, and builder confidence from the NAHB. How do these look?

Total starts had rebounded to 590 thousand in June, and have moved mostly sideways for eight months. Single-family starts were at 484 thousand (SAAR) in January, up 1.5% from the revised December rate, and 36% above the record low in January and February 2009 (357 thousand). Just like for total starts, single-family starts have been at about this level for eight months.

Housing starts are moving sideways . . .

The housing market index (HMI) was at 17 in February. This is an increase from 15 in January.

The record low was 8 set in January 2009. This is still very low – and this is what I’ve expected – a long period of builder depression. The HMI has been in the 15 to 19 range since May 2009.

More moving sideways . . .

New Home Sales in January were at a seasonally adjusted annual rate (SAAR) of 309 thousand. This is a record low and a sharp decrease from the 348 thousand rate in December.

And it would be generous to even call this “moving sideways”.

Automatic Earth continues:

Sheila Bair’s report on the banks is abysmal, lending in the private sector is falling off a cliff while public lending is running up that same cliff, and in that quote above Geithner just told us that there are no plans to quit adding to the debt before spending gives birth to growth in some fictional fairy tale of immaculate financial conception. But it’s beyond foolish not to ask what happens if no such fairy tale ending exists, if only simply because the risk that pervades the entire endeavor is as palpable as it is terrifying.

The taxpayer funds presently spent on the thus far evasive dream of recovery and growth resumption could be spent on programs to soften the blow of possibility number two, where growth never resumes, or doesn’t do so for many years to come. It’s one thing for everyone to want growth, it’s quite another to actually get what you wish for.

Jim Kunstler has for years been predicting that we’ll blow our last wad trying to maintain business as usual long after BAU is over for good.

Given the reality of peak energy, it’s time to begin planning for “possibility number two, where growth never resumes”.   As economic activity is dependent on energy inputs, declining energy availability means return to growth simply isn’t in the cards.

Time for Plan B.