Sat10252014

Business & Real Estate

Economists recommend continuing stimulus

The National Association for Business Economics (NABE), a large international group of applied economists, strategists, academics and policymakers, recently surveyed its 236 members on a number of government policy issues.

The results show that there is little support among economists for policy tightening over the next 12 months. In fact, the economists recommended increasing government stimulus efforts in 2013, while postponing fiscal tightening until 2014 and beyond.

Eric Morath of the Wall Street Journal quotes Jay Bryson, global economist for Wells Fargo Securities and one of the survey’s authors: “A good consensus of economists for 2013 don’t (sic) think policies should be tightened. There is a recognition that the economy remains very, very sluggish and the unemployment rate remains unacceptably high. They are looking for tightening later, rather than sooner.”

In the longer run, everyone agreed that fiscal belt-tightening would be necessary to reduce the federal deficit. A majority of the economists believed that government fiscal policy must be more restrictive starting in 2014. Yet there was overwhelming support for a balanced approach to fiscal tightening – more than 90 percent said Congress should both cut spending and raise taxes.

The economists were divided on the efficacy of the Federal Reserve’s quantitative easing approach. Some felt that it hadn’t done much for the recovery, and that there’s a risk of destabilizing the economy in the future through higher inflation.

NABE members also weighed in on federal regulations. Regarding big banks, two-thirds of the panelists believed that a Volcker-type rule, which would prohibit banks from engaging in trading for their own accounts, should be enacted. However, there was less agreement on the “too big to fail” approach, with more than half contending that banks that are “too big to fail” should be broken up – but one-third said they would oppose such a move.

Overall, the vast majority of the panelists believed that uncertainty about fiscal policy is holding back the pace of economic recovery. Let’s hope that our politicians are listening.

Los Altos resident Artie Green is a Certified Financial Planner with Cognizant Wealth Advisors. For more information, call 209-4062.

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