Thread Necro!!! (Well, almost....) From 8 years ago:
Ok, I hate making predictions, but that's pretty much the only way people will pay attention.
However, ceteris paribus there is no reason to see any recovery this year beyond small growth in existing business.
What drives a recovery after a recession is new businesses taking over the assets and resources (e.g. workers) of failed business.
In a recession, the price of starting a new business drastically drops as there are great numbers of failed businesses leaving machinery, land, retail space, and workers unutilized. (In economics, this is part of Tobin's q or the Q theory of investment.)
New businesses (or existing ones) will not need to build new machinery or new warehouses or many other things, but can take over existing, unutilized resources. This is what spurs the rapid growth that generally follows an economic downturn. The economy is currently recovering, but only slowly. Historically this is unusual.
The reason for this is businesses have a virtual certainty that taxes will increase next year. If nothing changes, taxes go up as the Bush tax cuts expire. This means that when a business invests this year (which necessarily means they are forgoing present consumption for future consumption), they are passing up enjoying their wealth now for greater (expected) wealth in the future when these investments pay off.
Of course, because of the virtual certainty of increased taxes, that payoff is smaller. Now, add to that certainty there is the uncertainty of what further damage will be done to their business by Washington (regulations, health care, cap and trade, etc...).
Uncertainty kills business as much as certainty about negative consequences. For this reason, few forward thinking businessman will invest this year because their return will be smaller. The democrat policies will kill all marginal investments, leading to the slow, painful recovery we see now.
Ironically, to encourage growth, the Democrats may not even have to cut taxes. Simply making the Bush tax cuts permanent (or extending them) should provide significant incentives.
And, as much as I would enjoy the irony of Democrats adopting yet another Bush policy they decried, that strategy is inconceivable to them. Thus, we will continue with this "jobless recovery."
It looks like (amongst my many failed predictions) this one held for the entirety of Obama's presidency. Obama had a couple years just over 2%, but never achieved a significant recovery.
It took a new congress and a new president before an actual recovery (as this appears to be) has taken hold. We are seeing sustained growth, likely over 4% this year. (We need more still, but that's a nice change.)
Funny what a change in the business climate there is now.
Additionally, realize that for most young people, this is the first "boom" economy they've ever experienced. For all the other doom and gloom, remember that some things are looking up.
