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A man once crowned the funniest celebrity in DC stood before the semiconductor industry’s leading lights to say that if we think we think the economy is going to turn around any time soon we’re mistaken. But, said Austan Goolsbee, former chairman of the president’s Council of Economic Advisers, there’s hope. Lots of it. In fact, for the United States, the long-term economic outlook is “better than fine.”
“The next 12-18 months don’t look that much better than the last 3-4 years have,” Goolsbee, an economics professor at the University of Chicago, said during his keynote address to the annual Semiconductor Industry Association dinner at the San Jose Fairmont (Nov. 13, 2014). “We have modest growth and modest jobs improvement. It’s not that fun; it’s not that celebratory.”
But Goolsbee, crowned in 2009 “DC’s Funniest Celebrity,” peppered his 30-minute speech with hilarious lines and anecdotes and wrapped up his talk with a decidedly optimistic outlook for a man specializing in “the dismal science.”
In a word, his presentation boiled down to “expectations.” He said that long gone is the notion that we will experience a V-shaped recovery after the Great Recession, which formally began in December 2007.
“The first year I was in Washington, they were talking about the V-shaped recovery. By my second year, they were talking about the U-shaped recovery and by the time I left in the third year, they were describing the L-shaped recovery, which is not even the shape of a recovery. Since then, they have moved to Greek letters and Arabic script.”
Much of the reason for this is that people—pundits in many cases-—have misunderstood the nature of this particular moment in history, Goolsbee said. Many are expecting a return to the economic conditions that predated 2007. When the downturn hit, some forecasts saw it as a financial bubble bursting that would require roughly seven years of de-leveraging to get back to "normal," Goolsbee said.
“They look at their watches and say ‘the recession began in December of 2007 and it’s November of 2014 so pretty much three weeks from now … we’ve turned the corner! We’re done!’ This is embodied in the Fed’s own forecasting model. They say we are about back to normal where normal is described and defined as what was going on in 2006."
Goolsbee said the economic industrial and technological transformation that the world is going through is also not a case for secular stagnation—an outlook whose message is “get used to disappointment,” he said.
“The secular stagnation is not going to be the future. Even the depressing 12-18 months (going forward) I describe is not going to be the future,” Goolsbee said.
Goolsbee’s case for optimism hinges on three points:
“For varying reasons, health care costs plus inflation are running at their lowest levels in a half century. If it grows at inflation rather than three times inflation, the way it has, that does more to solve the deficit problem than was called for by the Simpson-Bowles commission.”
“The answer is because the innovative capacity of human beings in general and the American economy specifically has proved unbounded. There is nothing that has changed in the last five years—as bumpy as the recession was, as painful as this transformation is—there’s nothing that’s changed about that commitment to innovation and entrepreneurship. That’s why it’s going to be fine. It’s going to be better than fine.”
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