Why 2012 Economic Outlook Is Better Than We Think
The U.S. is not in desperate times. But Americans believe that we are. From unemployment to debt to manufacturing, The Daily Beast’s Zachary Karabell on why things are looking up for 2012—really.
Years from now, when we look back at 2011, it may be remembered as one of the best worst years of the early 21st century. You’d be hard-pressed to come up with an extended period where people were more negative, yet remarkably, in the United States at least, not much actually happened. A summer debt impasse looked dramatic but in the end was resolved, and markets went up and down wildly yet ended largely where they started or better. Judged by every major economic indicator, it was the most stable period in a long while, with every sign that 2012 will be better yet. There is only one not-so-small problem: almost no one believes it.
In the current climate, even suggesting that things are OK can generate virulent reactions. How can one say that the economy is decent when tens of millions of people are unemployed, underemployed, discouraged, or don’t get paid enough to keep them above the poverty line? When the global financial system remains imperiled by a European sovereign-debt crisis that nearly exploded in November and is by no means fully resolved? And when the best the U.S. can hope for is a level of growth well below that of the second part of the 20th century and far less than most people expect or desire?
All of the above is true. Yet, those truths can and do coexist with the reality that the statistical entity known as the U.S. economy is much healthier than most people think. It is the health of middle age, however, not the flush of youth, and saddled with an unhelpful dash of Peter Pan syndrome. Overall growth for the next year is shaping up to be 2 percent, give or take. That is pretty lame compared to the heady days of the 1990s or even the mid-2000s. But those seemingly halcyon periods benefited from bubbles, whether the stock market and telecom spending in the 1990s or the housing and debt-inflated growth of the mid-2000s. So while activity now doesn’t look so good by those comparisons, it is actual economic activity undistorted by bubbles. It’s as if the economy of the past 20 years was wearing platform shoes (“Wow, she’s like 6 feet tall”); it looked a lot bigger than it was.
Now, growth is less impressive but for the first time in a long while, it is real. Yes, government debt has ballooned, but it has done so in a climate of very low interest rates, which means that servicing the public debt costs less than at any point since the 1980s. I’ve learned the hard way that debt is the third rail of rational discussion, but unless you’re alarmed by big numbers (“We have trillions in debt!”), the dollar amount shouldn’t be the issue. After all, the United States also has a very large economy. Big economy, big debts.
more:
http://www.thedailybeast.com/articles/2011/12/27/2012-economic-outlook-why-things-are-better-than-we-think.html?utm_medium=email&utm_source=newsletter&utm_campaign=cheatsheet_afternoon&cid=newsletter%3Bemail%3Bcheatsheet_afternoon&utm_term=Cheat%20Sheet
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