Larry Summers, a former Treasury Secretary under Clinton and economic advisor to Presdient Obama, predicts a 1 in 3 chance for another recession next year.
On the current policy path, it would be surprising if growth were rapid enough to reduce unemployment even to 8.5 percent by the end of 2012. A substantial withdrawal of fiscal stimulus will occur when the payroll tax cuts expire at the end of the year. With growth at less than 1 percent in the first half of this year, the economy is effectively at a stall and facing the prospects of shocks from a European financial crisis that is decidedly not under control, spikes in oil prices and declines in business and household confidence. The indicators suggest that the economy has at least a 1-in-3 chance of falling back into recession if nothing new is done to raise demand and spur growth.
Soon, relief will give way to alarm about the United States’ economic future. Among all the machinations ahead, two issues stand out: First, the single largest and easiest method of deficit reduction available is the non-extension of the Bush tax cuts for upper incomes. President Obama should make clear that he will not accept their extension on any terms. Clarity on that trillion-dollar point, along with very modest entitlement reform, will be sufficient to hit current targets for deficit reduction. Second, it is essential that the payroll tax cut be extended and that further measures, such as infrastructure maintenance and extension of unemployment insurance, be taken to spur demand. There is still time to confirm Churchill’s maxim that the United States always does the right thing after exhausting all the alternatives.
WaPo, Larry Summers
I'm glad Summers wants jobs spending and and end to Bush tax cuts for the rich. He's not my favorite, but at least he wants those things.
Austerity will not help. And Republicans will defeat any jobs programs, even if we could invest (and we cannot with the deficit deal).
Let's hope the 2 in 3 chance of no recession wins out. :-)
But unemployment may well rise in 2012, not go down.
That will not help Democrats of this President in the November elections. And so many people will continue suffering.
This is a Depression for many. If there is a double-dip, even economists may see this as the Second Depression.