by Bo Cutter
Thursday, 03/1/2012
Recovery winter? Not so fast. All signs point to political dysfunction that will wreck the economy.
We are about to see an abrupt slowdown in economic growth this year and next. It will be a policy-induced slowdown, not some mysterious event caused by aliens. We have delayed obvious policy actions for so long now that a slowdown is virtually inevitable. There is absolutely no room — or inclination, so far as I can see — for a compromise between the two parties that might conceivably change this outcome. We have pushed more and more major decisions into the post-election lame duck congressional session, making a policy “accident” (and there are no good accidents) more and more likely. This slowdown, which will begin in the second half of 2012 and extend through 2013, could happen rapidly enough to influence the 2012 presidential election. And it certainly won’t help President Obama.
The story begins with a still fragile and low-level economic recovery. President Obama’s budget projects 2.7 percent growth for 2012 and 3 percent for 2013. These are very low growth numbers after a recession as major as the one we just lived through. But I’ve always thought they were too high. As a comparison, the CBO, a public source of economic forecasts, and Merrill Lynch, a private source, are each projecting much lower growth. For example, in its most recent weekly research report, Merrill projects growth of 2 percent this year and 1.4 percent in 2013. The CBO is even lower. So our base economic picture is one of very low growth.
But despite this low growth, we’ve been lucky this year. The combination of stable energy prices and one of the two mildest winters in the last decade boosted the economy for the last quarter of 2011 and the current quarter. Stable energy prices have meant that people’s real wages could improve. And they have. Warm weather has meant that more people are working — between 50,000 and 100,000, according to Merrill. Helped by these factors and the last impacts of the 2009 stimulus program, we grew at about 2.5 to 2.6 percent in the last three months of last year, and we’re set to grow at slightly above 2 percent for the first three months of this year.
Continue reading at: http://www.newdeal20.org/2012/03/01/the-coming-economic-growth-collapse-73253/
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