U.S. economy to continue slow, painful recovery in 2013: expertsSouce:Xinhua Publish By Jane B. Hatcher Updated 28/12/2012 9:31 pm in Business / no comments
WASHINGTON, Dec. 27 — The U.S. economy is poised to continue its painstaking slog toward recovery, with no immediate growth spurts for 2013, according to experts.
A spate of recent data paints a less-than-ideal picture: The jobless rate remains high at 7.7 percent; GDP growth is forecast to be lukewarm for most of next year; and this month’ s National Federation of Independent Businesses’ Optimism Index took its sharpest dive since 1987.
On top of that, consumer confidence dropped Thursday to its lowest level since August on fears over sweeping tax hikes and spending cuts due to kick in next week if Congress does not hammer out a deal with the White House.
“I think the economy is recovering, but at a painfully slow rate,” said Gary Burtless, a senior fellow at the Washington-based think tank Brookings Institution.
Indeed, the drop in Americans’ wealth since 2007 continues to be a drag on household consumption in addition to sapping companies’ confidence in their ability to expand U.S. operations, Burtless said.
U.S. households between 2007 and the start of 2009 lost around 19 trillion U.S. dollars of wealth — one quarter of households’ net worth.
Many losses were in housing, and evidence suggests Americans spend around 5 percent of their gains in housing wealth every year, which implies household consumption might be 750 billion U.S. dollars per-year higher if the wealth collapse had not occurred, Burtless said.
Some economists say the government is the greatest drag on the economy, which does not bode well for next year.
James Smith, chief economist at ParsecFinancial and former president of the National Association for Business Economics, argued that the Consumer Financial Protection Bureau and other parts of President Barack Obama’ s financial reforms, as well as the president’ s healthcare revamp, have created deadweight losses of around 1 trillion U.S. dollars per year.
Burtless said the adverse impact of healthcare reform on small business employment has been wildly exaggerated.
Smith said other existing regulatory costs in excess of benefits raise the total deadweight loss from regulations to over 1.8 trillion U.S. dollars a year.
“Previous recessions never saw such a gigantic increase in government spending and regulation,” he said. “If federal government spending were back to 18 or 19 percent of GDP, we’d be growing above 4 percent a year.”
Other drags include the uncertainty created by the fiscal cliff; slowing growth in China; and recessions in the Euro Zone, Britain and Japan.
Still, there may be light at the end of the tunnel. Burtless contended the U.S. economy is recovering more quickly and steadily than most of its rich-country counterparts. The United States continues to benefit from rapid technological innovation, creative entrepreneurship in technical fields, and the development of cheaper energy resources.
“It is for these reasons, I think, that American economists are more optimistic about the medium- and long-run than we are about the near-term chances for an economic boom,” he said.