In a steady crunching beat over crispy snow it’s one foot after the other. Head down to measure every step for solid footing before the next careful crunch. There’s nothing but grey sky tinkled with flakes if you bothered to look ahead anyway. Most of the US has experienced that this December, but the economy has been doing that for at least four years now. And like a brisk and noisy walk through the cold eventually you find that you have actually gotten somewhere.
Along with the blustering weather news that has dominated this month there has been a lot of good economic news. Most recently the growth in GDP for the third quarter came in at a rosy warm 4.1%.. The National Retail Federation tells us that the holiday retail season is indeed going to come in with an impressive 3.9% growth over 2012, the high end of predictions. But not everyone thinks the future is so bright. It’s worth running down the reasons for both naughty and nice economic news for next year.
With all of the good news it seems as though the reporting is emphasizing the negative. Perhaps years of gloom have worn on people, but it seems to be a more solid trend. I’m starting to become suspicious that some people are deliberately talking down the economy for political reasons, claiming that the Obama administration is to blame. Regular readers know that the Barataria view is that we’re under a pressure from long-term trends that point no blame at organized policy, other than the inability to grasp the reality of the situation well enough to improve it. Assigning blame is pretty silly in this views.
But these long term trends are definitely starting to bubble up into the mainstream press. An excellent article at MSNBC summarizes the case for continued slow growth into 2014. It comes down to three possibilities, working alone or together. Larry Summers, economic advisor emeritus, points to income inequality as a serious problem that will continue to limit growth. Daniel Alpert points to more and more workers around the world competing for a limited number of jobs. And Jared Bernstein cites the pile of debt that still hangs around consumers and businesses that has to limit investment.
All of these are serious problems, which is why it is taking so long to restructure the economy in a way that makes sense in light of these realities. Barataria has answered all of these by in part proclaiming that the retirement of the Baby Boom, now starting, will free up jobs and actually cause a worker shortage – and that this will improve the income inequality situation. Debt is another problem, and the two ways out of this are to either start growing our way into it or to start canceling it in a kind of Jubilee.
The positive case is made by Christine Lagrande of the IMF, who is extremely optimistic about the US economy. The official forecast of the IMF has not been made, but she expects it to be higher in 2014. The Wall Street Journal has noted that the big increase in 3Q13 came from improved consumer spending, the most moribund sector of the economy so far. There is reason to be hopeful.
What should we make of this wide divergence of views? The answer is that consumer spending is not going to save us with an aging population, so while it might get better it’s best to not expect miracles. But the longer term trends are both positive and negative at the same time. We do indeed have another three years or more of one foot in front of the other before anything will change.
Naturally, good public policy might hurry that along. But no one is ready to change a thing on that front, so don’t expect anything for years at least. We can expect to keep crunching through the snow for a while yet. But to the naysayers who point out how difficult the walk is and how cold and grey it is outside there is a message. One foot in front of the other gets you there eventually.