Two economic surveys – one released yesterday and the other today – show that economists are worried about economic growth, but they also are deeply concerned about rising budget deficits.
I should mention at the onset that I am involved with both of these surveys. I am a board member and the chair of the policy survey committee for the National Association for Business Economics (NABE), and I am one of the 43 economists surveyed by the Associated Press (AP).
The AP Survey of Leading Economists noted that there will be weak economic growth over the next twelve months, but it is unlikely that we will have a recession. With that said, economists feel that a recession is more likely today than when surveyed in June, with the average likelihood increasing to 26 percent from 15 percent earlier.
Consumer spending and continued weakness in the housing sector will dampen economic growth. GDP is expected to grow around 2 percent for second half of 2011, and the unemployment rate should be 9 percent at year’s end. The unemployment rate is expected to fall to 8.5 percent by the end of 2012. In addition, the respondents noted “more gridlock ahead as a congressional committee seeks ways to cut at least $1.2 trillion in debt.”
Fiscal policy was the largest focus of the fall NABE Economic Policy Survey, which was released yesterday. By and large, most of the economists surveyed favored spending cuts as a means of reducing the deficit, but a majority would seek a more “balanced” approach. With that being said, two-thirds of the economists surveyed doubted that we would get comprehensive tax reform passed in the next year.
Not all economists feel that we should be so worried about budget cuts right now, though. Given the current weaknesses in the economy, nearly 37 percent of respondents to the NABE survey would prefer fiscal policy to be more stimulative over the next two years. Over 70 percent, though, expect that to see continued contractions in federal spending instead.
Business economists also weighed in on two policy questions important to manufacturers. First, 82 percent felt that we should pass the free trade agreements with Columbia, Panama, and South Korea. As you can see this is an overwhelming majority in favor of getting these agreements approved. In addition, over half of the economists surveyed were opposed to the National Labor Relations Board’s recent complaint against Boeing regarding the location of a new factory in South Carolina.
Chad Moutray is chief economist, National Association of Manufacturers.