Simply “eating our peas” won’t solve the country’s financial fiasco, says economist Sean Snaith, referring to President Obama’s recent urgings to pass a debt deal by Aug. 2.
Neither will political bargains hashed out in the final hours of “Republicans and Democrats’ debt détente,” he adds.
Instead, Snaith says we need “meatier economic polices” that would reign in spending by acting on recommendations from the president’s deficit reduction committee – such as cutting entitlement costs, reforming the tax code and closing loopholes.
“For too long, we’ve played with America’s finances like it’s our first credit card,” said Snaith, the director of the University of Central Florida’s Institute for Economic Competitiveness. “Now, we’re in the hole more than $14 trillion. To dig out, we need less swiping and more slicing and dicing.”
In addition to releasing his quarterly U.S. forecast this morning, Snaith blasts politicians for playing a “political game of chicken” while the American consumer rides in the back seat.
“None of what’s being offered up now is a comprehensive solution,” he says. “Instead, we’re seeing lawmakers crafting a legislative escape hatch to further delay these tough decisions.”
Snaith offers an otherwise grim, but slowly recovery, view of the U.S. economy in today’s report.
His full forecast is available on the institute’s website.
Several highlights include:
— The U.S. economy lost momentum in the first half of 2011. Real Gross Domestic Product should accelerate to 3.3 percent during the third quarter and ease to 2.8 percent in the fourth quarter.
— Payroll employment growth remains sluggish. But what’s a bigger problem are the increasing rates of underemployment, which stands at 16.2 percent in June. This unused capacity in the labor market will get utilized before firms need to go out and hire new workers. By the end of 2014, the unemployment rate will still stand an uncomfortably high 7.3 percent.
— Consumers still face a wealth problem, particularly the loss of home equity. Home equity remains at the same level witnessed as the nadir of the financial crisis. For most consumers, their nest eggs have gone from ostrich-sized to robin.
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
Snaith is also a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, Bloomberg U.S. Economic Indicator Survey and USA Today Economic Survey Panel.
The UCF Institute for Economic Competitiveness’ mission is to expand public understanding of the economy by convening business leaders, scholars, policy makers, civic groups and media to discuss critical issues.