Reading the Future, Economics in 2007
By Timmy Watson in News on Dec 10, 2006 9:01PM
The annual University of Chicago Graduate School of Business’ forecast luncheon took place on Wednesday, December 6. The forecast, which takes a look at the domestic and international indicators regarding the economy, gives the political and business community a basis for which they can plan for the year ahead.
This year the luncheon featured the remarks of Austan Goolsbee, Michael Mussa, and Marvin Zonis. One of the major economic points that has been drilled into in the past few months is that with the economy and stock market performing well this year, the Government will be receiving increased tax receipts this year which will bring down the deficit. The deficit is currently at record highs and we and our children are in trouble if it doesn't start decreasing soon. Goolsbee indicated that while the deficit will shrink on paper, the actual deficit will nearly explode. One of the major reasons for this, according to Goolsbee, is the Government's accounting policy. The Government uses cash accounting, which allows them to wait until money is spent to count it. The major program this affect is the Social Security program, "...they don't have to actually start spending money on your retirement for a few years sooooo, they can count the cash coming in as revenue and not count the what they will owe as expenditure," said Goolsbee.
Mussa takes the opportunity to show a somewhat tricky plan for avoiding stagflation, or, high inflation and low output growth. Our output growth is going to be affected by the inevitable and all ready declining housing market, but Mussa believes the downturn in the housing market will be offset by continually rising "business investment in equipment, software and structures." One thing Mussa also believes is that economic indicators will decrease consumer spending. This seems like wishful thinking since most data is reporting extremely high consumer spending and increasing personal debt.
Zonis focused more on global trends driving politics. Zonis believes the United States will be forced to provide more accommodation with the Islamic world as opposed to using strong arm tactics to attain specific goals. In another point, which also drives home the declining influence the U.S. will have, Zonis says that, while the United States will continue to be the sole superpower there will be other "global centers" which will increasingly drive "new economic, scientific, and political initiatives." Zonis also focused on internet influence globally, which is pretty close to Chicagoist's heart. Zonis believe small groups on the internet are driving policy, it is unclear whether Zonis believes this is a positive or negative affect. We think that, while small influential groups could exert undue force to change policy, the internet has overwhelmingly given voices to those in less democratic countries that have never been heard from before.
To continue reading the future, visit the University of Chicago Graduate School of Business’ 2007 forecast website..