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|Thursday, January 10, 2013|
BY LINDA BAKER
At Wednesday's Portland Business Alliance Forum breakfast, Oregon economist John Mitchell presented his view of where the regional and national economy is headed in 2013. It was a cautiously optimistic short term outlook — not so optimistic for the long term. Alas, Mitchell would not allow me to reprint his end-of-speech poem, a brilliant and funny recap of 2013 data points: interest rates, inflation, job growth, taxes and so forth. Instead, here are a few notable and quotable excerpts from Mitchell’s talk:
• People who are waiting for the economy to turn around are a bit misinformed. The economy has actually been on the upswing since 2009, although it’s been a barely perceptible upswing. “The next turn is down,” Mitchell said.
• Much of GDP growth in Q3 2012 came from an increase in defense spending and inventory accumulation, neither of which are going to continue their upward trajectory. “We’re going to see weaker growth in the 4th quarter.”
• Housing was late to the party, but thanks to price declines and historically low interest rates, it has been a growth sector for six quarters, and is now one of the few bright spots. Nationwide, residential permits are up 32% during the first 11 months of 2012.
• The number of renters is also increasing, thanks to young people who are shying away from home ownership and tighter credit standards. Mitchell recounted a joke currently making the rounds in mortgage lending circles: in the old days, banks handed out mortgages to anyone with a pulse, otherwise known as “P.” Today lenders require both a “P” and a “U”: a urinalysis and a polygraph.
• Job growth is on the upswing in 44 states, but not by much. About 4 million people are out of work, and the labor force participation rate is about 63 %. The last time it was that low was December 1981.
• The policy cauldron threatens to drown us all. “The debt ceiling was punted, not dealt with." The country also faces two very different problems: a short-term problem of weakness and long-term problem of unfunded promises. "These are two very different things that require different solutions. Short-term weakness says you stimulate the economy. The long-term problem says you've got to have some restraint."
• The big picture for 2013: “It’s a 2% forecast: 2% growth, 2% inflation. Not exciting, but up.” But if the short-term forecast is for very slow growth, the long-term implications are sclerosis and stagnation. “We’re on a Japan path.”
After the talk, I caught up briefly with Mitchell, who tacked on another problem that threatens to explode in the coming years: the clash of generations. Every generation likes to think it’s the apocalyptic generation, and that the world is going to hell, said Mitchell.
But there’s a qualitative difference between today’s apocalyptic thinkers and those of generations past, Mitchell said. Typically, it’s the elder generation bemoaning the excesses of the young.
“This time it’s the old people doing it to the young,” said Mitchell. With an unsustainable fiscal sitution, including expansion of Medical entitlements, sapping spending in education, health care and infrastructure, baby boomers are reaping the benefits while young people paying into the system will be left with nothing but the bill.
Or, as Mitchell put it, “There’s no Association for Non-Retired Persons” lobbying on behalf of children or young adults.
He alerted me to a book: the Clash of Generations: Saving Ourselves Our Kids and Our Economy, a call to arms that describes a U.S. in worse shape than the bailed-out countries of Greece and Ireland and the pending financial catastrophe facing our children.
“Read it, and I guarantee you won’t be able to sleep at night,” Mitchell said.
It's not exactly poetry, but a pretty concise recap of the 21st-century U.S. economic outlook nonetheless.
Linda Baker is managing editor of Oregon Business.
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