Monday, February 27, 2006

Roaring '06

The National Association for Business Economics has come out with their forecast for 2006... and it's a good one. This may disappoint DovBear, who had an otherwise decent post about wiretapping, but tried to argue that the economy was in bad shape in the middle.

Some key aspects:
The economy ended 2005 like a lamb and is roaring back like a lion, a resounding rebound that economists say will lead the Federal Reserve to raise interest rates in the months ahead. The fresh forecast from the National Association for Business Economics has gross domestic product growing at a robust 4.5 percent annual rate from January through March.
What's very interesting is that the economy is expected to do well, despite an expected slowdown in the second half of the year:
For all of 2006, the forecasters expect the economy to grow by 3.3 percent. That would be a solid performance, but slightly below the 3.5 percent increase in GDP in 2005. Economic growth in the first half of this year is expected to be better than the second half.
Watch for Democrats running for office this November to argue that the economy is slowing down - ignoring that it is expected to do so and yet still perform very well. Depending on how short-sighted the voters are, this could work; but most Democrats will probably realize that this is not a smart tack to take. Overall, the economy has performed brilliantly since the Bush tax cuts were instituted, and unemployment has dropped tremendously - and should continue:
On the jobs front, solid economic growth should help lower the unemployment rate this year. The unemployment rate, which averaged 5.1 percent last year, should drop to 4.8 percent this year, the association said. The jobless rate should edge up to 4.9 percent in 2007, according to the forecast.
Even the deficit is shrinking, albeit very slowly because of terrible pork spending. What about inflation, which has been pretty low for a while, though it jumped after Katrina and the like?
The economists see inflation calming this year, with consumer prices expected to increase by 2.9 percent this year and 2.4 percent next year. That would be an improvement from last year's 3.4 percent jump, the biggest in five years.
There are very few issues with the economy - the current growth is sustainable, and strong. Unemployment is very low. Inflation is low. The deficit needs to be reduced - and cutting outrageous spending is one thing that needs to be done; the rest should be taken care of with solid growth and production. Then there's Social Security, which should be overhauled; but that's for another discussion. (I'm ignoring the problems with the current tax structure, which, while I'd love for it be overhauled, simply won't be happening anytime soon.)

What happens in the fall elections will be very interesting - but don't be surprised if the GOP holds about the same number of seats as they currently have, despite the normal off-year drop. A strong economy is always a big factor in what is essentially a domestic issues election.

Technorati tags: , , , , , , , .


  1. These are the only two sentences in the post in question which discusses the economy:

    "Enacting tax cuts for the wealthy? Oh, don't worry about the fiscal implications (like the long-term, humongous national debt); everything will work out."

    Will you please point to the part where I "tried to argue that the economy was in bad shape?"

  2. That's not? If the fiscal implications are terrible, that means the economy is not doing what it should be doing. No?