A good rule for a forward-thinking executive to observe is never go anywhere -- at least don't walk into any meeting -- without the latest projections or models for the U.S. economy for the year ahead. How's the U.S. economy likely to perform in the year ahead? Well, here are the summaries of economist David H. Wang's models based on predetermined values for 20 proprietary variables.
Realignment: This forecast assumes a modest $200-400 billion fiscal stimulus, a $70-80 a barrel oil price, record / near-record home mortgage foreclosures, along with efforts to realign U.S. energy policy, and reductions in health care spending accompanying national health care legislation. In this model unemployment rises to 9.5% and the recovery does not begin until Q4 2010. (That's correct: Q4 2010.)
Elongated: This model assumes a modest $200-400 billion fiscal stimulus and a $60 a barrel average oil price, with another year of record / near-record home mortgage foreclosures. Unemployment rises to 9.0%, and the economic recovery does not begin until late Q2 / early Q3 2010.
Steady-state: This model assumes about $500 billion in fiscal stimulus and a $60 a barrel average oil price, among other factors, that limits the recession's depth slightly. Unemployment still rises to 8.0% from the current 6.5%, but the economic recovery begins in early 2010.
Jump-Start: This model assumes two large fiscal stimulus packages, each at least $400-500 billion, an oil price of $50 a barrel or less, a universal federal FDIC / Treasury home mortgage refinance program that substantially lowers mortgage defaults, and a tax credit for businesses to both retrain existing employees and hire new ones, among other workforce increasing incentives. Under this model, unemployment rises to 7.5% and the recovery starts by Q4 2009.
Economic Analysis: In Wang's models, fiscal stimulus plays a significant role in shortening the recession, but the ability to end the rise in home mortgage foreclosures, as well as the level of energy prices are also important. Note how unemployment rises in every model, with the best scenario being a rise to 7.5% from the current 6.5%.
Note also how health care reform -- although long-term beneficial for the U.S. economy because it would both lower health care costs and make U.S. companies more competitive with their European and Japanese counterparts -- is nevertheless a short-term negative for the economy as fewer dollars will be spent on health care.
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Reader Comments (Page 1 of 1)
12-03-2008 @ 12:02AM
J. Dupuis said...
What $50.00 oil? American tax payers paying for a national health care system? Massive amounts of money to "invest" in energy infrastructure? Government experts say we will be hit by either a nuclear or biological attack by 2011, with a President that thinks Iran cannot hurt us...this article is very similar to the story of the wizard of oz...