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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The economy is expected to register 3% growth or better for the fourth quarter, thanks to stronger consumer spending; however, the growth in consumption has been outpacing income, debt is piling up again, and some pullback in consumer activity is likely in the first half of 2012.

Unlike the boom years of the last decade, households will not be able to refinance credit card debt and auto loans by further mortgaging homes, and consumers simply must slow down during the first half of 2012.

The economy will register growth at or below 2% in the first half of 2012, perhaps picking up in the second half of the year to 2.2% to 2.5%. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Occupy Wall Street may be out of Zuccotti Park but Americans ignore its message only at their peril.

Dispossessed by police from prominent venues around the country, the forces that inspired mass, albeit unseemly demonstrations have not abated. America is rapidly fracturing into two nations–affluent players in the global economy and a growing mass facing diminished circumstances for themselves and their children.

If forces marginalizing millions are not addressed, America is headed for much worse than tent cities and baths in parks. Economic bifurcation into the super affluent and the poor will erode the institutions and values that bound together immigrants from many heritages, faiths and tongues into a single nation.

The Census Bureau reports about 100 million Americans–one in three–live in or perilously close to poverty. Many are working but rely on food stamps, government agencies and charity to feed, clothe and provide medical care to their children. Most have too few resources to see a dentist regularly or even subscribe to a daily newspaper. They rely on cars, often because decent housing is much too costly near their work, and are forced to live too inconveniently from grocery stores, other services and multiple jobs to practically rely on public transportation. Continue reading…

These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Just a year after wealthier European governments rescued Athens from default with $157 billion in loans, Greece is slipping into crisis again.

After seeing its credit rating sharply downgraded on Monday, and unable to meet deficit-reduction targets laid down by Germany and others, Greece is getting desperate–and Europe is getting anxious.

Officials are floating euphemistic phrases like “voluntary restructuring,” but make no mistake: The painful concessions Greece would probably require from creditors amount to a default. If that happens, the broader European economy will be on its knees, its credibility shattered. So what should Greece do?

The only real solutions are for Greece and other low-income countries to abandon the euro and for Europe as a whole to rethink its welfare state.

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These are the views of Thomas Lam, group chief economist at OSK Group/DMG & Partners:

Following a bunch of apparently softer-than-expected releases earlier, the April labor market report on Friday took on more prominence. The increase of 244,000 April non-farm payrolls combined with upward revisions of 46,000 in the prior two months was respectable. The fairly widespread gain in private (goods-producing up 44,000 and service-producing up by 224,000) employment of 268,000 was inspiring. But the continued contraction in government jobs of 24,000 (mainly in state and local governments–down 22,000) was not a surprise.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, the U.S. Labor Department reported consumer prices were up 0.5% in March, driven by 3.5% and 0.8% jumps in energy and food prices.

This is the fourth straight month of large gains in consumer prices. While food and energy prices may be volatile, international conditions indicate commodity prices will continue surging, and the Fed’s emphasis on core inflation is absolutely misplaced.

With inflation running at 6% a year, it will be tough for the Federal Reserve to deny inflation and continue quantitative easing and low interest rates generally. Similarly, with unemployment likely to remain above 8% for the balance of the year, the Fed will find it tough to raise interest rates too much.

The U.S. economy is headed for stagflation thanks to failed banking and international economic policies that lie largely beyond the Fed’s control.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

President Obama and Congressional Republicans are tabling proposals to balance the budget, and Americans have a right to be skeptical.

Since 2007, spending has increased $1.1 trillion and the deficit has jumped from $161 billion to $1.6 trillion. The President’s February budget projects the deficit will fall to $772 billion by 2022. However, that forecast is dubious because it assumes 4% growth over the next four years, which few economists would endorse, and cuts in Medicare payments to physicians and hospitals, which few political observers believe will materialize. More likely, deficits will exceed $1 trillion, or even $1.5 trillion, for many years to come.

The president will propose higher taxes on the wealthy and plugging some corporate tax loopholes but that simply won’t do it. His budget already assumes repeal of the Bush tax cuts for those earning over $250,000. Even raising income taxes by 50% on all families earning more than $200,000 would not yield much more than $250 billion a year. The resulting capital flight would reduce taxable income, and job losses would drive up federal social spending; net deficit reduction would not be large.

Although some loopholes could be plugged, moderate Democrats and Republicans agree U.S. corporate taxes are too high for American companies to be competitive. Most revenue that might be found fixing abuses will eventually have to be put into lower corporate taxes for those firms bearing more than their fair share of the burden.

At the core of the fiscal mess are the rapidly growing bills for Medicaid, Medicare and Social Security.

On health care, the fundamental problem is that federal and state governments pay 55 cents of every dollar spent on health care. A private market for health care no longer exists, and government reimbursements set most prices for health care services.

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 These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Gasoline prices are soaring past $4.00 a gallon in many places and driving will continue to be more expensive. Unless consumers are determined to again recklessly pile up credit card debt, higher gas prices will profoundly slow other purchases and the economic recovery.

Over a three-year period, most folks don’t have much control over how much they spend on rent and mortgage payments, utilities, tuition and food, or how much they drive. Gasoline absorbs 15% or more of most household budgets, and the necessity of getting to work and driving kids to soccer practice does not relent when gas prices jump.

With gas prices up from $2.75 a gallon since last September, higher prices translate into a 5% cut in discretionary income, and Americans will be eating fewer restaurant meals, wearing fewer new clothes, curtailing summer vacation plans, and postponing furniture purchases and home improvements.

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(These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission.)

Federal finances are in shambles, and Americans should be amused if not disgusted by the explanations and solutions both political parties offer.

President Obama’s budget plan issued in February projects a $1.6 trillion deficit for 2011 and a cumulative shortfall of $11 trillion through 2021.

Things may get worse, as additional revenue and cost savings from health care reforms don’t materialize and the 4% growth assumed by the president’s budget for the next four years proves Pollyanna.

Time and again, Obama and House Democratic leader Nancy Pelosi have demagogued the problem, blaming two wars and tax cuts instigated by President Bush and the Great Recession.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

The Labor Department reported Friday that the economy added 216,000 jobs in March. After adding 194,000 jobs in February, this indicates the economy is finally gaining momentum. First-quarter growth will likely be a bit higher than 3%.

Unemployment ticked a notch lower to 8.8% on the strength of jobs growth. Unlike past months, this improvement could not be attributed to adults leaving the labor force.

These gains are in sharp contrast to weaker gains the previous 13 months, and largely resulted from stronger, potentially self-sustaining private-sector jobs growth.

As measured by gross domestic product, the economic recovery began in July 2009; however, the economy did not begin adding jobs until January 2010, and gained only 76,000 jobs a month through January 2011. Too many of those job gains were created by stimulus spending, temporary business services, and health care and social services, which are heavily subsidized by federal and state governments. Job gains in the core private sector–private employment less temporary business services, and health care social services and temporary business services–averaged only 47,000 a month.

Core private-sector jobs are so important, because those have the potential to set off a virtuous cycle of hiring, consumer spending and more hiring. In March and February, this barometer of private sector vitality gained 183,000 and 157,000 new positions, respectively. Similarly strong core private-sector gains will be needed to continue adding 200,000 or more new jobs each month going forward.

The jobs drought may finally be over but important challenges remain.

Gains in the range of 200,000 a month are not enough to push unemployment down to acceptable levels. Continued dependence on foreign oil, the growing trade deficit with China, and health care and tax policies that penalize the location of businesses in the United States are responsible for slower jobs creation than has been accomplished during past recoveries and that could still be achieved.

The economy must add 13 million private-sector jobs over the next three years–360,000 each month–to bring unemployment down to 6%. Core private-sector jobs must increase at least 300,000 a month to accomplish that goal.

The economy is expanding at a 3% annual rate and this is barely enough to hold unemployment steady, because the working age population increases 1% a year, and productivity advances about 2%. Growth in the range of 4% to 5% is needed and possible to get unemployment down to 6% over the next several years.

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These are the personal views of Peter Morici, a professor at the University of Maryland’s Robert H. Smith School of Business and former chief economist at the U.S. International Trade Commission:

Friday, economists expect the Labor Department will report the economy added 200,000 jobs in March. After adding 192,000 jobs in February, this would indicate the economy is finally accomplishing momentum.

The February gain was in sharp contrast to weaker gains the previous 13 months, and largely resulted from stronger, potentially self-sustaining private sector jobs growth.

As measured by GDP, the economic recovery began in July 2009, but the economy didn’t begin adding jobs until January 2010.

Through January 2011, the economy only gained 77,000 jobs a month, mostly thanks to stimulus spending, temporary business services, and health care and social services, which are heavily subsidized by federal and state governments. Job gains in the core private sector — private employment less temporary business services, and health care social services and temporary business services — averaged only 45,000 a month.

Core private sector jobs are so important because those have the potential to set off a virtuous cycle of hiring, consumer spending and more hiring. In February, this barometer of private sector vitality gained 170,000 new positions. A similarly strong core private sector gain will be needed to add 200,000 new jobs overall in March. If that is accomplished, we may finally be getting someplace. Continue reading…