Archive for May, 2010

Yesterday I was privileged to be present at the CACI “U.S. Economic Outlook: 2010 and Beyond” Lunch Meeting, presented by Marty Regalia, Ph.D. and Senior Vice President and Chief Economist at the U.S. Chamber of Commerce in Washington D.C..  This lunch meeting took place at the Denver Post Building, Main Floor Auditorium, from 11:30AM to 1:30 PM.

The report of our economic situation here in the U.S. was less than motivating.  First, Marty spoke about the history of this economic downturn, starting out with the sub-prime mortgage crisis.  Now banks own hundreds of thousands of properties through foreclosure, that they must hold and slowly feed into the market so that market value will not take a hit.  This has caused the credit situation to be tight, as banks are very cautious in giving loans, and the penalties are severe for giving “bad loans” at this time.  The job situation is even more somber.  Currently there are approximately 8 Million people out of work that contribute to the unemployment percentage displayed by Washington.  There are an additional 4 Million “Discouraged Workers” that are not included in the unemployment numbers we receive regularly, as they are not even looking for work.  Over the past 6 months, 500,000 jobs have been created, but yet the unemployment percentage has increased.  This is due to the fact that Discouraged workers are coming back on to the market as they see job growth numbers.  According to Marty, this is something we will see throughout the remainder of this year.  Compared to previous recessions, the U.S. Economy is not growing fast enough.  In previous recessions, it has taken 1-2 years for the economy to provide jobs and absorb the unemployed work force.  Right now, there are approximately 12 Million unemployed, and we have created 500,000 jobs in the last 6 months.  Doing the math, we are looking at 12 years to absorb these workers, unless we grow faster.  GDP is at 3.5%, where historically after a recession, GDP is around 6%.  The growth just isn’t coming as fast as our economy requires it. 

Marty then gave analysis of our trade markets.  While we see the Asian markets are huge, they are not our major trade partners.  At this time, our major “buyer” is the EU/Europe.  Given the climate there, Greece and Spain are doing very poorly and dragging the EU down.  Europe is not buying like they used to, bringing our exports to a less than stellar source of revenue.  In addition our investment market is at a stand still.  It has stagnated over the past 8 years, as people aren’t investing as much because they have not seen decent returns in the market.  People have been scared out of taking risks, which has brought our investment market to a stand still.  All of these factors simultaneously is almost the “perfect storm” for our economy. 

As for government intervention, according to Marty, it has not been addressing the real issues at hand.  After the health care bill, the government has still failed to address the major problems with our large budget items- Medicare, Medicaid, and Social Security, all of which have major issues.  Marty also mentioned that the things that our federal government is doing such as removing tax exemptions all over the place, doesn’t scratch the surface of our spending problems.  The government offering a tax credit for hiring an employee, is also not addressing the problem.  The real problem is, that retailers and business people need customers walking through their doors.  Right now that is not happening.  Consumer spending is extremely low compared to 10 years ago.  The problem is, how do we get people spending again?  According to economic models presented at this meeting, with our GDP growing at the rate it is growing, and our deficit and debt growing at the rate it is growing, we are looking at bankruptcy within the next two decades.  Not to mention that before that happens, we will have transferred most of our wealth to the nations that hold our debt.  According to Marty, unless we see some major changes, and unless the government starts to address the real problems at hand, the economic projections long-term are grim. 

John F. Haettich