Economist: U.S. still sifting through 'broken dreams'
Overall, 2012 will be up year, he tells Vancouver audience
Tuesday, June 26, 2012
Job growth is up, the United States is in its third year of economic expansion, and consumers — who face generally stable prices — also are shedding debt.
Time to raise our expectations about the quality of our lives in the months and years to come, right?
Not so fast.
What is closer to the truth is that we have “lots of broken expectations and broken dreams we’re still working our way out of,” John Mitchell, principal of Portland-based M&H Economic Consultants, said Tuesday during a breakfast event in Vancouver.
Unemployment among the young is rampant, the nation’s political dysfunction runs high and homeownership — long a part of the American dream — is the lowest it’s been in 15 years, Mitchell told more than 150 people who gathered inside the Heathman Lodge to listen to his presentation, sponsored by Riverview Asset Management Corp. and Riverview Community Bank.
Although 2012 will, on balance, remain an “up year” for the U.S. economy, Mitchell said, it also will be filled with anxiety and “policy paralysis” on the part of federal lawmakers.
It’s not that there isn’t good news, Mitchell said, as he punched home the following encouraging signs:
• A study by Arizona State University found job growth is up in 42 U.S. states, with Washington and Oregon ranking ninth and 27th, respectively. “You’re in a good place,” Mitchell told attendees.
• Since 2006, mortgage debt has declined.
• Since early 2011, consumer credit has risen, largely reflecting the fact that people are borrowing to purchase cars. “The car business is pretty good,” Mitchell said.
• Census data show 780,000 residential construction permits were issued in the U.S. in May, a 25 percent increase from May 2011. Housing construction is “coming back, but it’s coming back very slowly,” Mitchell said.
However, the slow nature of the nation’s economic recovery is hardly the only worry.
Mitchell, former chief economist of U.S. Bancorp and a former Boise State University economics professor, said “downside risks” have increased since the Great Recession ended in June 2009 and since the U.S. economy returned to growth.
One of those downside risks is the European sovereign debt crisis, Mitchell said. It illustrates just how tied people’s fates are to the rest of the world.
“How many times in your life have you worried about Greek elections?” Mitchell said.
Another downside risk is the “fiscal cliff,” or “taxmageddon” we face in the U.S., Mitchell said.
Those foreboding phrases are references to the potential economic shock that will occur when national tax and spending policies play out simultaneously at the end of this year.
The Obama adminstration’s temporary payroll tax cuts as well as tax cuts approved during the Bush administration are slated to end after this year.
Meanwhile, cuts in spending on defense and federal programs are scheduled to take effect in 2013 after a congressional “supercommittee” failed to reach a debt-reduction deal last year.
Mitchell said the Congressional Budget Office — “not exactly a group of bomb throwers” — has warned the nation risks a recession in 2013 if its political leaders allow the federal spending cuts and tax-cut expirations to occur.
It begs the question, Mitchell added: “Do we have an environment that encourages growth?”
Aaron Corvin: http://twitter.com/col_econ; http://on.fb.me/AaronCorvin; 360-735-4518; firstname.lastname@example.org.