"It's the economy, stupid." Really. James Carville's famous shout out during the 1992 presidential campaign remains relevant today, 20 years later. U.S. economic growth is expected to increase about 3% in 2012, according to Mark Zaporowski, Ph.D., of Canisius College in Buffalo, N.Y. In this interview, Zaporowski discusses his outlook and factors that contribute to our economic growth, such as European debt, jobs and the housing market.
Now that we've had our first look at gross domestic product for the fourth quarter of 2011, what is your outlook for U.S. economic growth in 2012?
I would expect real GDP growth to be in the 2.7% to 3% range during 2012. This projection assumes that there will be no new macroeconomic economic shocks such as a disruption of oil supplies resulting from a confrontation with Iran or other major financial market problems.
How will the global economy impact the U.S. economy this year, and vice versa?
The main risk to U.S. economic growth at this stage appears to be associated with the European debt crisis and to what extent the U.S. financial system will suffer if the situation isn't resolved. If Europe undergoes a recession, U.S. exports would be hurt and this could negatively impact U.S. growth.
Other than the presidential election, what other significant events or factors will influence the U.S. economy in 2012?
I would expect continued slow improvement on the jobs front during 2012. The stagnant housing market in the U.S. is another factor slowing growth. Since tax reform isn't likely to occur until after the presidential election, I don't believe that it will be a factor in 2012.
Do you see specific issues such as income inequality, Occupy Wall Street or tax reform having an impact on the U.S. economy this year?
I don't think that OWS or income inequality will be a major factor in 2012 except in terms of how important they turn out to be in influencing the elections.
Special thanks to Mark P. Zaporowski, Ph.D., professor of economics and finance at Canisius College, Buffalo, N.Y., for answering our questions in this interview. Thank you to Greg McBride, CFA, senior financial analyst, Bankrate.com, for contributing the questions.