Last year, I compared the U.S. economy to a workout fanatic who would have to spend a lot of time in the gym to carry its own weight (that column is available at http://bit.ly/vZr0fA).
Keeping score, as I have been doing since 2006 on this page, may be easy this time around. I could just blame the lackluster performance of the economy — compared to my prediction — on the fact that it was a couch potato. This would also fit our times perfectly since “assigning blame” is what we see all around, especially from our political non-leaders.
Pondering the general tenor of this column while writing it, I was struck by the fact that I could not muster the usual optimism bias, which I always had when looking to the upcoming year.
On Jan. 1, 2011, I had exuberantly written that it was “Time to grab on to that ‘silver lining’” (http://bit.ly/W9BS98) while acknowledging the economy faced serious roadblocks. Similarly, on Dec. 31, 2011, I spoke of “lots of hopeful signs.”
However, this time around, the “fiscal cliff” nightmare overshadowing everything makes it exceedingly difficult to focus on the “half full part” of the (looking) glass.
No matter what happens in the last few hours of 2012, the reality is that people’s lives have already been impacted and disrupted by the “fiscal cliff” inaction.
Businesses are not sure what they should withhold from their employees’ paychecks, middle-class families fear the AMT-trap, organizations providing vital services that are partly financed by the government don’t know what will happen next and neither do their clients. The complete list is even longer and heart-wrenchingly discouraging.
One could add to this pessimistic attitude this year’s “World Economic Outlook” published by the IMF (available at: http://bit.ly/UAWNHn), which names uncertainty in the U.S., slowing growth in China and Euro Zone troubles as culprits for the slowdown in the world economy.
It is exactly that uncertainty caused by our politicians mired in gazing at their own ideological navels, which keeps the U.S. economy vacillating between hopeful signs (one step forward) and troublesome indicators (two steps backward) such as ever larger cash reserves by companies instead of investments and tepid employment growth, if any.
The 2012 Economic survey of the United States by the OECD (available at: http://bit.ly/VbR5XR) said as much and added, even more ominously for the U.S.: “Innovation performance has weakened according to various indicators.”
So here we are at the end of 2012.
Of course, you didn’t think that I would conclude my last column of the year with a sour note, or did you?
Here is a toast to what has sustained our economic model for decades: human ingenuity. I refuse to believe this irrational back-and-forth in Congress will continue.
Both voters and business will not stand for it, and they will find a way to pressure their “representatives” to listen to what George Mason University economist and bestselling author Tyler Cowen calls the “honest middle.”
Those with an ideological axe to grind (“No higher taxes. Ever!” or “Don’t touch entitlements. Ever!”) must not be permitted to have our economy grind to another screeching halt by sending it into a free-fall over a self-inflicted fiscal cliff.
That is my hope for the next year — more rational action and an end to irrational inaction.
Dr. Michael Reksulak teaches economics and public finance in Georgia Southern University’s College of Business Administration. He may be reached by email at mreksula@georgiasouthern.edu.