I know some folks who have an uncanny ability to predict the future. They are not psychic, indeed, they are the kind of people that discount that sort of thing out of hand.
The secret of these folks is that as critical thinkers, they are able to recognize the assumptions of the present state, AND MAKE INFERENCES from the data that they have.
They make these inferences by not being slavishly tied to the present assumptions.
The folks at the National Association of Manufacturers (PMPA is a member) have issued a new report fiscal shock: America’s Economic Crisis Executive Summary.
8 bullets that tell the future your business is facing:
- Absent legislative action, large spending cuts and large tax increases will hit the economy at the same time, causing a total fiscal contraction of $500 billion, or about 3.2 percent of GDP.
- Washington’s failure to address the pending fiscal cliff is already having an impact, cutting 0.6 percentage points from GDP growth for 2012.
- The worst could be ahead. If the fiscal contraction happens, the economy will almost certainly experience a recession in 2013 and significantly slower growth through 2014.
- From 2012 to 2015, the economy will lose 12.8 percent of the average annual real GDP it could have attained with moderate growth, sapping critical resources from all economic sectors.
- Job losses will be dramatic. By 2014, the fiscal contraction will result in almost 6 million jobs lost, and the unemployment rate could reach more than 11 percent. (U-3 unemployment U-6? Too scary to contemplate!)
- Households will take a big hit. Real personal disposable income will drop almost 10 percent by 2015.Reduced U.S. Standard of Living
- Manufacturers of consumer goods and defense contractors likely will see large and durable contractions in their industries.
- It will take most of the decade for economic activity and employment levels to recover from the fiscal shock. Another recession could deal a substantial blow to long-term economic potential, permanently reducing living standards in the United States.
These eight points document why manufacturers are worried about slowing economic growth.
If you think that Hurricane Sandy is the perfect storm, wait until you see what happens when sequestration cuts, other federal spending cuts, and layoffs hit at the same time that U.S. taxpayers- investors, businesses, employees get hit by a sudden increase in tax liability.