As the U.S. economy slogged through a
recession following the credit crisis in 2008 and the E.U. was weighed down by
the ballast of austerity in the most indebted states, developing economies,
including those of China and India, kept the world economy afloat. As a group,
those economies grew 7.4% in 2010, 6.2% in 2011, and 5.5% in 2012. In keeping
with this trend, the Global Economic Outlook of the Conference Board predicted
4.7% for 2013. Fortunately, the Board also predicted a pick-up in consumer
demand in the U.S. to pick up the slack. “The only really short-term positive
impact that we can have is that we can see a faster return of demand,
particularly in the U.S.,” the Board’s chief economist said. As of 2012, such a
return was not necessarily “in the cards.” The pessimism can be seen in the
projected world economic growth of 3 percent, which is lower than the 3.2% expected
in 2012 and the 3.8% achieved in 2011. That the projected growth rate of only 1.8%
for the U.S. in 2013 is less than the projected 2.1% for 2012 indicates that
increased demand in the U.S. was not expected to fully pick up the slack for
the slowing-down of the developing economies. Here I want to point to a major
factor in the U.S.: the possibly impending “fiscal cliff” of cuts in the
federal budget and the end of the Bush tax breaks that were scheduled to begin on January 1,
2013 unless Congress and the White House could come to a legislative agreement beforehand
on an alternative way of holding down the deficits. Presumably that way would
have a less recessionary effect.
The full essay is at "The Fiscal Cliff in the U.S."
