Will economy take off mid-year?
Iraq situation, tax cut are big factors in rebound question
Brian Wesbury encounters a lot of "dour attitudes" and pessimism about the economy as he travels the country. But he’s not pessimistic.
On the contrary, Wesbury, a Chicago-based economist, is rather optimistic that a significant rebound is in the works.
And that rebound could come as early as June, says Wesbury, the guest speaker at the recent Ozaukee Bank 2003 Economic Forecast breakfast.
Wesbury believes the economy will accelerate, with growth rate climbing from its current 3% to 5% or higher. Income will rise, and the stock market will see growth.
"In my opinion, we’re going to have a very good year in stocks," said Wesbury, who is chief economist at Griffin, Kubik, Stephens & Thompson. The stock market turnaround "will carry us into 2004, 2005," he predicted.
Terrorism and the threat of war remain factors in the economy, noted Wesbury, who spoke on Feb. 25, adding that the uncertainty of war is the major factor.
"Uncertainty is what we’re dealing with today," he said. "We don’t know what will happen in Iraq. You can’t invest in that situation, so most people step back. Uncertaintly is really what’s holding back the economy."
Wesbury sees war in Iraq as inevitable, with a US victory. And that will help spread freedom and economic growth throughout the Mideast, he believes. "By being victorious, we will make the entire Mideast better," he said, likening a crushing of the Saddam Hussein regime to the fall of the Berlin Wall.
That all plays well with his view of the world and economics. To him, economic growth and reduction are tied to "economic freedom." The freer a country’s economy, the more likely that its economy will grow.
US tarrifs on steel and lumber earlier in the Bush administration helped drag down the economy, he said.
The Bush Administration is now pursuing policies of less regulation of the economy, prime among those efforts being the president’s proposed tax cut, which Wesbury favors and which he believes the president will accomplish. "The president will get most of what he wants in a tax bill, in June or July," Wesbury said. "The economy will immediately begin to accelerate," as people with money to spend renew their investments and risk-taking ventures, he added.
He cited the experiences of the Kennedy and Reagan administrations’ tax cuts, which fostered significant economic growth after recessions.
March 7, 2003 Small Business Times, Milwaukee, By David Niles, of SBT
