According to the new CBO economic and budget forecast, the US economy will grow at just 2.2 percent next year, keeping unemployment above 10 percent. In fact, it has the jobless rate averaging 10.1 percent vs. 9.3 percent in 2009. As the CBO puts it:
From the great David Goldman:
When Reagan took office in 1981, the baby boomers were in their 20s and 30s, America had a 10% savings rate, the current account was in surplus, and America was the world’s largest net creditor nation. Reagan was able to cut taxes and finance an enormous budget deficit because the world’s demand for US Treasury securities was correspondingly large. In 2010, the baby boomers are in their 50s and 60s, America has saved nothing for a decade, the current account remains in severe deficit and the world is choking on the existing supply of Treasury securities. Cutting taxes to stimulate the economy is not as simple this time round.
This is the second edition of my chat with the fabulous Nicole Gelinas, author of the phenomenal must-read, must-own After the Fall: Saving Capitalism from Wall Street and Washington. (Part one is here.)
Goldman Sachs thinks 4Q growth could be as a high as 6 percent. But don’t think the firm is as cheery about the labor market despite the “stable” 10 percent unemployment rate in December. Some bullet points:
The anti-Larry Summers buzz grow louder ( such as here, here and here.) There is a lot going on here. Liberals blogs have been all over him for pushing the $800 billion stimulus plan instead of the $1.2 trillion option presented to Obama by Christina Romer. Liberals, including Paul Krugman, thought it was too small then and have double-downed on that opinion since. (Alas, no high speed rail or modern-day WPA program for them.)
The trend is not the Democrats’ friend. At least not in 2010. The party of the sitting president almost always suffers losses in midterm congressional elections. To that time-tested dynamic now add voter angst about high unemployment, big deficits and controversial legislation. Expect Senate majority leader Harry Reid to lose his effective 60-seat supermajority and Nancy Pelosi to hand the House back to the Republicans. Here’s why 2010 is looking like 1994 all over again:
The always fantastic Joel Kotkin lays out the argument:
By 2030, all our major rivals, save India, will be declining, with ever-larger numbers of retirees and a shrinking labor force. … By then, the U.S. will have 400 million people, which may be more than the entire EU and three times the population of our former archrival Russia.