From UCLA’s Anderson School of Management (HT Instapundit):
In its third quarterly report of 2010, the UCLA Anderson Forecast predicts “very sluggish growth” for the foreseeable future as the U.S. economy continues to recover from the recession. As for the California economy, the state is looking at a difficult period ahead as it attempts to regenerate not only the 1.3 million jobs lost during the recession but also create additional jobs needed for new entrants into the job market over the past two-and-a-half years.
(Senior economist David) Shulman also writes that, “the recovery from the balance-sheet recession is being exacerbated by an extraordinary increase in policy uncertainty, which is amplifying the usual economic uncertainties associated with recessions.” Simply put, he believes that the nation’s businesses are unsure of the implications of their investments — whether new hires or new computers — given the uncertainty surrounding tax, environmental, energy, financial, labor and health care policies.
“At present,” Shulman said, “business firms can only make the wildest guesses as to what corporate and individual taxes will be next year, and, for that matter, three years from now what the cost of health care will be, whether or not there will be a revived cap-and-trade policy with respect to carbon emissions or whether the Environmental Protection Agency will step in with regulations of their own absent a statute, and whether it will be easier or more difficult to hedge risks with financial derivatives.”
Given these factors, the Forecast expects very sluggish growth accompanied by high unemployment.
“As time passes,” Shulman said, “the economy will naturally heal and the policy uncertainties will resolve themselves to allow growth to return to a 3 percent path, causing unemployment to begin a long-awaited downward trajectory. We forecast that these more ebullient trends will become noticeable by 2012.”
The Forecast predicts the national unemployment rate will be 9.7 percent by year’s end and 9.5 percent in 2011.
Though I would like to be wrong, I think Shulman is overoptimistic about 2012, on two levels.
First, in terms of growth itself, the uncertainty may not sort itself out as easily as Schulman breezily assumes. As I pointed out in late July (“It’s the Uncertainty, Stupid”):
If you think the uncertainty is bad now, look at what’s coming. How many yet to be discovered daggers to personal and economic freedom lie in the thousands of pages of signed but largely unread legislation? How much more damage will be done when unelected, job security-conscious technocrats add tens of thousands of pages of regulations into the mix?
When you consider what the President’s czars and bureaucrats can do under near or actual cover of darkness to companies in general and targeted companies in particular, it’s not even certain that an earth-shaking “One Nation Under Revolt” election will solve this.
Second, the growth that does occur may continue to be in the government’s portion of GDP. As I noted in late August, since the beginning of the third quarter of 2008, the first full quarter of the POR (Pelosi-Obama-Reid) Economy, the federal government’s GDP has grown by over 12%, while private sector GDP has shrunk by over 2% — and it’s only that “low” because Government/General Motors and Chrysler are still considered “private” entities as normal people would define it) in the economic statistics (which, of course, they aren’t). Note that the way “growth” stats are measured is dependent on measurements of “spending,” and presupposes that such spending is done rationally, in the sense of being in the spenders’ perceived best interests and not done wastefully (as perceived by the spender). If the past 20 months have shown us anything, it’s that we cannot assume that government money will be spent as Congress or even the administration intended, or that it is done efficiently.
The obvious solutions would be for the administration and Congress to:
- let the federal tax system we’ve had in place virtually unchanged during the past eight years stay in place indefinitely (this is usually referred to as “making the Bush tax cuts permanent”)
- abandon cap and trade.
- repeal ObamaCare.
This administration won’t even consider any of the three, proving despite all its rhetoric to the contrary that it values the pervasive atmosphere of uncertainty more than it values economic growth and job creation.