Predictions for U.S. Economy in 2012

The past three years has seen an economic downtu
in the United States of such proportions that we have not witnessed since the Great Depression of the 1930’s. With a staggering unemployment rate of around 9%, there are unprecedented amounts of debt --with consumer confidence at near lows at the end of 2011. The projected economic forecast for 2012 does not seem all that much brighter.

While there are certain positive signs the economy has not fully tanked, there are now several forces at work which are predicted to keep our economy from fully turning around by the end of 2012. While economic forecasts cannot be fully accurate given that heretofore unknown factors can have a great impact. Unknown factors such as the 9/11 attack in 2001 which sent the US economy plunging down further than it was after the “Tech Bust” of 2000. There are some factors which are well known and will have a strong impact on the US economy.

European Debt: The crisis which is currently gripping Greece appears to be spreading to other European countries, particularly Ireland and now Italy which is the 8th largest economy in the world. A debt crisis is currently gripping most European countries. Countries which are based on their aging populations leaving the work force with too few people left to pay the taxes necessary to support the government. While Greece has a relatively small economy, Italy’s is so large that if they go into bankruptcy it might take down most of Europe.

In turn, if Europe falls into crisis, then the US will be greatly impacted as well. With the massive investments and reliance on Western Europe in particular, a great economic downturn will have a severe hit upon our economy. The question now is not if it will happen, but when. Economic giants such as Germany can help delay the crisis, but not prevent it. If it will happen in 2012 remains to be seen.

Election: In Presidential elections, traditionally our elected officials do very little to “rock the boat,” so to speak. The current debt crisis has paralyzed both the Congressional and Executive branches into non-action. While there are ideological and philosophical arguments on both sides, the traditional political maneuverings during a Presidential election year will accomplish little if anything. This lack of action may make little sense during this time of great economic stress, but from a political standpoint it makes perfect sense. If you don’t do anything, then how can you be blamed for it in case it goes wrong or doesn’t work as fast as you promise?

US Consumer Confidence: Most large industries in the US have plenty of money for investment and interest rates are at historic lows. But one big reason most companies are not expanding is the extremely low confidence the American public has in the economy. There are certainly many other reasons why large companies are not investing, but until consumer confidence picks up, the economy will stay in the doldrums.

Based on the impending crisis in Europe, the Presidential election, and low consumer confidence, there is little reason to believe that the US economy will improve over the next year.