What the Current Economic Outlook Means for American Families

The economy is likely to keep improving, but slow growth could develop into chronic stagnation.

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Now that the fiscal cliff fight is over and the debt ceiling debate hasn’t reached a fever pitch — not yet, anyway — it seems like a good time to take a step back, assess the economic outlook, and see what it means for American families. The good news is that the U.S. has enjoyed more than three years of uninterrupted economic growth and falling unemployment since the recession ended. The bad news is that this has been the weakest rebound since World War II. Economic growth has averaged less than 2.25% since the recovery began and is estimated to have slowed to less than 1% in the most recent quarter. Unemployment is still way above where it should be at this point.

Budget problems remain the chief impediment to faster growth. The fiscal cliff deal did little to reduce the annual deficit, almost $1.1 trillion last year. Not all of that amount needs to be eliminated, though. Part of the current deficit is simply the normal result of a weak economy. Moreover, if the economy were growing at its historical average rate of 3.25% a year, the U.S. could afford to run a deficit of half a trillion dollars or so. Even so, the deficit still needs to be reduced by something like $300 billion a year. That means further spending cuts and tax hikes that will be a drag on the economy.

Consensus estimates are for slightly slower growth this year – an estimated 1.8%, down from 2.2% in 2012. The most optimistic economists foresee a small improvement in growth this year, followed by 3% or more in 2014. While that would get the economy back to its long-term average growth rate, it would remain far short of the powerful rebound that normally follows a recession.

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To see what this outlook is likely to mean for typical American families, it helps to take a closer look at these factors:

Unemployment. For the past three years, unemployment has been coming down slowly but steadily. The most recent report calculated that 155,000 jobs were added to the U.S. economy in December and that the unemployment rate of 7.8% was unchanged from the revised figure for November. Significantly faster job creation – 300,000 or more new jobs a month – would be needed to bring unemployment down with the speed desired.

Taxes. While the fiscal cliff debate centered on tax hikes for the rich, the expiration of the payroll tax cut means that most middle-class families are paying $600 to $1,200 more a year. With both the debt ceiling and the sequester approaching, additional revenues will probably have to be raised as part of any bargain to cut spending and reduce the deficit. Any tax rate increases or caps on deductions will doubtless be aimed at the rich, but typical families will probably be hit to some degree as well.

Inflation. Policy makers can relax when annual inflation is between zero and 2%, and right now they’re enjoying sweet repose. Consumer prices have risen only 1.8% over the past 12 months. Indeed, this past summer Federal Reserve chairman Ben Bernanke rated his policy of quantitative easing as pretty much a total success. Only trouble is, Bernanke has tripled the size of the money supply in the process, which could spur inflation if the economy ever starts growing robustly.

Household Debt. Consumers remain cautious, and credit-card debt is down 16.5% since it peaked before the recession. That will enable families to step up their spending a little as the economy improves. Certain specific categories of debt, however, are still rising. In particular, big student loans are weighing on recent college graduates who have not yet been able to find well-paying jobs.

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Home Prices. The real estate market continues to move up, and further improvement is likely as unemployment comes down. But home prices remain far below their previous highs. Moreover, there is still an overhang of distressed and previously foreclosed properties for sale that will hold back a broad housing market recovery.

Gas Prices. Although gas prices fell  late last year, they have started back up again, thanks in part to steeper taxes. Overall, they remain quite high by historical standards. Ultimately, gas prices depend on the cost of oil, which has more than doubled since the recession ended. As the global economy recovers, demand for oil could increase, which would keep gas prices high.

The Stock Market. The combination of slow growth and low inflation is generally good for stocks, and a number of forecasters see moderate gains for blue chips this year – including Jeremy Siegel, who has said “there is an overwhelming probability that we’re going to get Dow 15,000.” Certainly it makes sense for investors to continue making contributions to their long-term retirement plans. Unfortunately, the current job market is forcing some families to borrow against their 401(k) savings.

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Overall, the economy is slowly improving, although it could be derailed by unexpected shocks. In addition to domestic problems, there are the same international risks that have existed for more than a year. Conflict with Iran could push up oil prices. Economic turmoil in China could disrupt the global economy. And the euro currency crisis – which continues to worsen despite sporadic upbeat declarations – could hurt growth worldwide.

For people who have secure jobs, good credit, and a stable housing situation, the outlook is generally encouraging. Taxes, inflation, and gas prices may creep up but higher stock prices and home values matter a lot more. The discouraging note is that this recovery will most likely continue to be weak. That won’t do much to help those who are unemployed or underemployed, or who have lost their homes. Addressing those problems would require far more ambitious budget reforms than have been considered to date. And without such reforms, the great danger is that current slow growth will slowly become entrenched in the form of chronic stagnation.

3 comments
ScottRyan
ScottRyan

Part 1 of 2 post


Making all Government departments self funded for life, saving the public money and making new jobs. cutting tax in 10 years.


Making a new tax or cutting cost by saving money. ether way this is the way to fix the worlds markets. 


Adelaide Australia need to make about $6 billion dollars a years. PS state government could do this by its self. get fed government to help.

Funding hospitals first and other GOV departments.

First you ether need to reduce cost or make a new tax to do this.

First i will show you  how it works based on 1.3 million  people, then at the bottom will show you how to save big bucks to help do this.

6 to 15 years to fund most government departments for life, also non gov departments to save money to the public.

 This is for Australia and is for state governments, you just need a amount of money to the size of people, so don't look at it in GST or a %. this is for Adelaide state government because they get 10% GST.

                          Australia GOV

We need to rise the GST to 12% or 15% from 10% what its at now. We need to put the extra money into a safe 8% interest term deposits to cover the cost of things forever.

They need to get about $6 billion a year.

Fix 3 hospitals over 2 years funding. so $12 billion + there standard funding put into along term deposit account making 8% off billions off $ put in. For 5 more years they will still put in there $350 million $ for the funding of the royal Adelaide hospital. It goes into the term deposit that‘s now paying for it / almost. So $12 billion + 5 * $350 million = $1.75 billion + the standard funding from the other 2 hospitals. About $250 million each. $500 million * 5 =s $2.5 billion $.

5 years time $12 billion + $2.5b + $1.75b =s $16.250 billion $, making 8% interest a year.

Will make about $1.25 billion a year of interest. $350 + $500 =s $850 million a year. =s $430 million dollars left each year to go back in.

Over 10 years cost will go up, so the $4.3 billion made off the $430 million put back in, over 10 years, will make $350 million a year. Each hospital gets a extra $116.3 million dollars a year after 10 years.

By the next 10 years that non stop putting back $430 million a year, will give them $116.3 million $ extra each year, and again in 10 years time a extra $116.3 million again, meaning in 20 years its a jump of $233 million dollars. Self funded forever, even taking care of rising cost.

After 2 year the 3rd year $6 billion dollars is up for the next department.

Dentist gets $6 billion in interest fund making, them $500 million dollars a year. 1 year one off funding. they would only need $200 million a year and the other $300 million is put back in making billions of dollars in interest over 10 years time. in 10 years it needs more funding. it will be making in 10 years $3 billion dollars. Gov can still give them its normal funding for the next 5 years then thats it, no more funding. So they put that normal money into that term deposit instead. We would be looking at interest off $4 billion dollars. so about $330 million dollars a year. So every 10 years they will get a increase of $333 million dollars for life. In another 10 years after that, they will be making $890 million dollars a year, its increasing every 10 years by $330 million dollars.

3 years from the start, and 2 departments and self funded for life.

Next the police.

Police departments 1.2 years. Police get $8 billion in a interest fund that makes them $650 million a year.

$650 - $350 there budget each year for 10 years. the police now gets less then $225 million.

$300 million dollars will go back in over 10 years. So in 10 years it goes up $100 million for there rise in cost.

$300 * 10 = s $3 billion dollars.

Now that its 10 years later, another $100 million dollars of funding a year for 10 years must be taken out.

So over 10 years of putting back in $300 million dollars they would of saved up $3 billion dollars, but once again for the first 5 years from the start of them getting the 8 billion dollars in a interest deposit making 8%. They will give it there normal funding to what they did over 4 year. so add a extra $850 million dollars to that in 4 years time.

So in 10 years time the money will be about $4 billion dollars. they will make off interest each year off that, $330 million dollars. they can increase there police money by $330 million dollars every year.

Do take into account that that normal funding will not be around after 4 years. does not matter they will get a extra $250 million dollars increase, and don't forget, there budget just got a massive jump at the start and 10 years after that $330 million dollars.

the police can employ mass more police and up grade all the time.

The police force would be massive, well to big, but that’s good, keeping things 10 times safer. 

ScottRyan
ScottRyan

4th year  $6 billion in a term deposit living off the interest, that much so, its even putting back in interest money made, and it paying for the rise of cost non stop forever.


After 5 years the GOV does not fund hospitals / police / Fire department & CFS 1 year / mental hospitals ever again. they are making very good money for life.


That’s 5 years above.


Next pay no more 6th year? 7th year? 8th year?

Council rates 1 years funding, no more paying them $2,000 a year. / Motor reg 1.5 years / Adelaide zoo & all wild life parks o.5 years funding .


They can fix mass departments over 10 years & can also cut cost to the public big time. They will also have a budget much bigger with nothing to do because most is covered and being covered every year.


Could not even think how rich Adelaide or any state would be in 2o years time, let alone 35 years time. the cost of living would be so low. dam after 10 to 12 years, they could just put 3 years / over 3 year $18 billion dollars into a fund to make everyone's power bill cheaper, / 90% cheaper. well that much money it would could you $1,500 for solar panels after a massive rebate.


The hole world should be doing this now, in 7 years things has changed big time, in 12 years time we are lathing. 25 years time my kids your kids are going to have a every good life.


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                               SAVING MONEY


First thing. make all GOV hospitals only buy generic brand medication. So if you brake your ribs and the hospital gives them pain killers to go home with, make shore you only buy generic brand pain killers, not the best brand that cost more and so on. Doing that will save you a massive amount of money every year.


All GOV departments using pens / paper / everything must be bought from china for dirt cheap.


Make it law that no one can drive home government cars after work, that will save you 10s of millions of dollars a year also. Just think what do normal people spend to drive there car to work each week? here in Australia $70 + dollars. you are talking about big savings.





New taxes. the only thing you can tax more is people that blow there money. so people that drink at a pubs / casinos. make a extra 50c tax each drink. If you have poker machines tax more money on the people that blow there money.


People that do crime, force them to work for you like community services. If you get busted doing petty crime, make them work and do jobs that cost you money. Like cutting GOV departments lawns and everything that cost you big bucks


Best thing to do getting people on GOV payments jobs. First force them to get jobs but like this. 



In Australia if you have kids you get much more money from GOV payments, so the people you want to get jobs first is them. 


So if a partner and his misses do not work, force 1 of them to look for a job first. If 1 of the partners get a job, you only will pay her a very small amount. His pay will be 100% cut and now that he earns a amount of money, her pay will be cut back big time. so 2 for the price of 1.


Doing that is better because it saves you money from 2 people from 1. single people get less money and its only there pay. couples that don't work get 2 pays and if only 1 of them gets a job, you almost cut there pay =s 2 pays by 1 person, instead of just 1 person.

Gov mobile phones. if people in gov get phones, they can not be used after working hours.

Doing all these things will save you a billions of dollars a year, and taxing the people that blow there money.


The best thing about it is that you have away to make departments self funded for life over 15 years.


Make no mistake this will even lower taxes in 15 years time once all departments become self funded and will save the public big bucks also.


Taxes just keep going up and up so you need a fix it for good. this is the only way to fix your country for good.


If for 1 second you do not even think about doing this, you are dumb. can fix everything and lower taxes and save the public big bucks.


If the public does not pay for water / council rates  / motor reg, that means they are going to speed about a extra $500 ++ dollars every 3 months. that means all company's restaurants are going to see a jump helping small company's and so on.



lordofthefly
lordofthefly like.author.displayName 1 Like

Media repeatedly fail to report that more than 60% of jobs created during the past four years have been low-wage. Somone working as a hotel desk clerk ("the booming job market in the hospitality industry") cannot afford to contribute to the consumer engine of the eocnomy. Are pole dancers part of the hospitality industry? Maybe their wages are higher than those of a waiter or hotel housekeeper.