Economic Forecast, November 2012

     The Budget crisis needs to be resolved without large spending cuts.  The way to pay off the debt is with more growth.  When companies and employees make more money, more taxes will be collected.  The increase in tax collections will balance government income to expenses.  Cutting government spending and jobs takes away from growth.  This will do more damage than deficit spending and debt increases.  This is a lesson learned at the beginning of the Great Depression.  President Hoover, using Classical Economics, cut government, and government spending and it made things worse.
     Once large cuts in spending are averted, modest growth will continue.  Jobless claims have been gradually reducing, contributing to lower unemployment.  Housing demand is beginning to increase, bringing prices up.  Homeowners are beginning to have equity in their homes again. 
     For higher growth rates to occur, investment must be increased.  Gross Private Domestic Investment was 6.6 in Q3, 2012.  Government incentives should be structured to encourage investment!


Clint Kennedy
Basic Economics Today LLC
Copyright © November 2012