First Take: Fed shows what might’ve been

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Of all the words, of economists and men, the gladdest are, this might have been.

With apologies to John Greenleaf Whittier, the Federal Reserve's new Beige Book gives a hint of what the government shutdown had begun to do to the economy — and how it might have gotten worse if Congress had not, to judge from the latest from Washington, come to its senses and made a deal to raise the debt ceiling rather than flirt with defaulting on the national debt.

Beige Book: Fed sees modest growth in economy

Things were already showing signs of slowing in September, the central bank said, as business people worried about the government shutdown and potential default. The survey, which reported that the economy continued to grow overall at a modest to moderate pace in late summer, broadly validates predictions that the shutdown would affect growth from the beginning — incrementally at first, and more as it went on.

"National contacts across districts generally remained cautiously optimistic in their outlook for future economic activity, although many also noted an increase in uncertainty due largely to the federal government shutdown and debt-ceiling debate,'' the Fed said.

The first signs were in tourism, as Beige Book contacts in places as diverse as Richmond, Va., Boston and South Dakota cited the closings of national parks as a risk. At least one government contractor pointed to the sequestration budget cuts as a problem for its business. Home builders in some parts of the country were seeing signs that consumers were worried about rising mortgage rates, a notion confirmed by the National Association of Home Builders' new confidence survey out Wednesday.

Apparently, though, we're not going any further down that road. If, that is, both houses of Congress approve the package worked out by a bipartisan group of legislators. If Congr! ess can agree on another deal in February, when the ceiling will have to be raised again.

If it does, then maybe we can enjoy the product of the notable number of animal spirits the Fed detected. The second-most noticeable thing about the Beige Book — maddeningly vague as it always is, and devoid of numbers — is the number of districts and industries that reported signs of a pickup in business investment, spanning everything from architecture firms to software vendors.

Investment has been a crucial missing link in this recovery, a captive partly of the constant to-and-fro of a national capital bent on drama. If it comes back, joining the auto industry's resurgence and a housing sector that has room to improve a lot more than it already has, maybe we can have a real recovery, after all.