Biz Economists See Deficit as No. 1 Issue
WASHINGTON -- “An overwhelming majority” of the 220 members of the National Association for Business Economics rank the projected federal deficits in the 2020s and 2030s as the “principal challenge facing the nation” but could not reach a consensus on how best to deal with the issue.
In the August survey of NABE, the chairman of its policy survey committee, Jay Bryson, global economist at Wells Fargo Securities, writes, “Most panelists favor a mix of policy approaches that include some form of spending restraint as the best way to address long-term deficits, with a plurality favoring a mixed approach of spending restraint and revenue [tax] increases.”
The semiannual survey on this topic, conducted between July 18 and Aug. 5, was released Monday.
The business economists polled were in greater agreement on “the appropriateness of monetary policy,” NABE reported, saying the Federal Reserve’s approach is “about right.” Half predict the Fed will begin to wind down its asset purchase program, of roughly $85 billion a month, by the end of the year but will maintain the Fed Funds rate through the first half of next year.
And while the economists generally support the Fed’s goal of no more than 2.5% inflation annually -- they predict inflation will remain at or near 2% over the next five years -- they are less united on shooting for an unemployment rate of 6.5% or less.
On fiscal policy -- levels of taxation and government spending -- 40% say it is “too restrictive,” more than 30% describe it as “just right” while 21% consider it “too restrictive,” NABE reports.
Asked to offer a cause of the deficit, which has been shrinking, 42% responded, “excessive spending,” which edged out the 37% who responded “lingering effects” of the Great Recession. Only 13% cited “insufficient revenues” as the cause.
The “vast majority [believes] structural elements are contributing to the current fiscal deficit,” NABE says, 43% responding the deficit is primarily structural in nature while another 42% see the structural and cyclical components as evenly balanced and only 13% attributed the situation as “mostly cyclical.”
Asked what the president and Congress should do to remedy the budget imbalance, 34% recommend “stimulate economic growth,” 32% would raise taxes and cut spending, 20% would cut spending and 11% would leave the current policy intact either because “they believe the present deficit is either not material or not the primary economic challenge facing the nation.”
More than two-thirds, 68%, say that uncertainty over fiscal policy is holding back the economy, down 11 points since NABE’s survey last March.
The NABE survey asked the economists their outlook on the effect of the Affordable Health Care Act. Sixty percent expect to see the federal government spend more on health care, 20% think it will spend less and 4% said it should have no effect. The remaining 16% offered no opinion.
Also serving on the NABE policy survey committee are Jim Glassman, managing director and senior economist at JP Morgan Chase, Constance Hunter, chief economist -- alternative investments at KPMG LLP, Charles Kensington, economist for the Virginia Department of Taxation, Emily Kolinski Morris, senior economist at the Ford Motor Co., and Lynn Reaser, chief economist at Point Loma Nazarene University.
Published by The Business Journal, Youngstown, Ohio.
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