DAVOS – Could 2013 be a
better year for the global economy than 2012 was? The answer, in
principle, is yes. In practice, however, the answer could be more
depressing.
In
the United States, the pieces are in place for stronger growth. The
housing market is finally recovering. The Fed has signaled that it is
prepared to do more to support growth and bring down unemployment. All
that other US policymakers have to do to ensure that 2013 is better than
2012 is avoid shooting themselves in the foot.
In
particular, to eliminate the uncertainty that continues to depress
consumption and capital spending, they need to avoid “fiscal cliffs”
(now and in the future), dangerous sequester mechanisms, and the
silliness surrounding the periodic approach of the debt ceiling. They
also must establish a credible plan for medium-term fiscal consolidation
– one that entails both higher tax revenues and expenditure reforms,
but only once the economy is strong enough to handle such measures.
