The fiscal cliff was just a warmup.
Jan 14, 2013, Vol. 18, No. 17 • By IRWIN M. STELZER
So there will be substantial political headwinds that the private sector must overcome if growth is to be sufficient to reduce the unemployment rolls and increase the flow of tax revenues to the Treasury. Fortunately, there is reason to believe that 2013 will be a year in which the economy does indeed overcome those headwinds. The recovery of the housing sector will continue and probably accelerate, boosted by some of the details in last week’s deal, such as retention of the mortgage deduction. Auto companies expect to move more than 15 million cars and small trucks from dealers to consumers’ garages, about 1 million more than in 2012. Growth in the important service sector is accelerating. Regulators will be unable to stifle completely the development of shale gas resources and the attendant growth of manufacturing industries dependent on that low-cost fuel. The dollar will fall and exports rise as the 2013 deficit tops $1 trillion and Ben Bernanke’s Federal Reserve Board continues to churn out dollars to keep interest rates at close to zero, despite doubts by an increasing number of Bernanke’s colleagues, and the gnashing of teeth of the nation’s savers.
There you have it. We enter a new year, one in which there is reason to expect better economic growth, after a deal that included substantial though probably not crippling tax increases, that gave consumers a somewhat firmer notion of what they have to spend after rendering unto Obama what is Obama’s, but that also increased the deficit and postponed the day of reckoning until at least March, when the president and Congress will have to figure out how to give the famous can another kick down the road.
Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).
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