Luca Bruno, file, Associated Press
The U.S. economy
What we now call the Great Recession officially began in December 2007 and ended in June 2009. It was the longest, the deepest and the most painful recession since the Great Depression.
By my count, that suggests that the current U.S. economic expansion is now reaching the two-and-a-half year mark. The current expansion has been less than satisfying both statistically and emotionally, with major headwinds still in play involving weak residential and commercial real estate markets, uncomfortably high unemployment, major European financial risk, and elevated levels of anxiety about the direction of the federal government.
The current U.S. economic expansion has been especially lackluster when considering the massive and unprecedented levels of both fiscal and monetary stimulus. While modest economic growth has returned, a "recession of confidence" remains center stage.
Economic growth in the new year about to unfold is likely to remain substandard, with most forecasts congregating around a 1.5 percent to 2.5 percent real (inflation adjusted) rate of growth. More bearish forecasters see particularly anemic growth in 2012's first half.
The size and scope of a possible European financial implosion could lead the United States and much of the world back into recession, although that is not the consensus view. Nevertheless, investors around the globe have taken a "shoot first, ask questions later" approach to European sovereign (national) debt markets and the contagion that has now spread to more and more members of the euro community.
Political theater of the absurd has been commonplace in the nation's capital, with extreme partisan politics today's reality. The government's ability to live within its means remains highly elusive, even as European developments should be sending strong signals to Washington about damaging annual budget deficits and a more than $15,000,000,000,000 gross national debt.
Various economic studies have suggested that any nation's ability to prosper and grow at a satisfactory pace is endangered when its gross national debt reaches 90 percent of that nation's annual economic output. We are now at 100 percent … and rising quickly.
Trillion-dollar-plus budget deficits of the past three fiscal years will continue for as far as the eye can see. The biggest threat to this nation is the financial cancer of irresponsible government deficits. As noted frequently, the need to slow the future growth pace of entitlement programs is mandatory.
Already tired of the political battles underway? Just think … only 342 days until Election Day! The failure of the "super committee" was the latest in government missteps. An emotional national debate about (1) the size and growth pace of the federal government and (2) who pays for it will be one key element of political discussion during most of 2012.
Wary business leaders and worried consumers have contributed to the weak level of American job creation during the current economic recovery. The nation has regained only one-fourth of the 8 million jobs lost during the crisis of 2008 and 2009. Unless and until confidence levels improve, weak additions to employment will continue.
The nation's unemployment rate has averaged 9.0 percent for the past three years. Most forecasters see an unemployment rate of not less than 8.5 percent by the end of 2012.
To be heard frequently during the presidential campaign now well under way … no sitting president in the past 75 years has been rewarded with a second term when the unemployment rate was above 7.2 percent. Whether the president can shift the blame for high unemployment to intransigent Republicans in the Congress will have a telling impact on election results.