2013 economic forecast: 'Don't worry about it'
LAKE IN THE HILLS – Tossing aside partisan rhetoric and cable news induced market panic, economist Brian Wesbury offered up a simple forecast for 2013: "Don't worry about it."
Concerned about sequestration? The continuing resolution? The debt ceiling?
"My real answer is: Don't worry about it," he said. "Stop thinking about it. Stop asking people about it. Stop talking about it."
Wesbury, the chief economist at First Trust Advisors in Wheaton, compared the United State's economy to a plow horse saying it would continue to plod along.
He blamed the tendency to discount economic gains since the 2008-2009 recession on a collective post-traumatic stress disorder. The economic crisis was so traumatic, he said, that some people seem unable to forget about it.
"I believe we've actually had a real recovery in the last three and half years," he said. "It's not something you write home about. I call it the plow horse recovery. ... I'm not saying things are great. They're not great. Not even close to great. But the bottom line is that we've been growing for three and half years."
Wesbury, a frequent contributor to the Wall Street Journal's editorial page and top-rated economic forecaster, spoke Wednesday at a luncheon hosted by Home State Bank at Boulder Ridge Country Club in Lake in the Hills.
The much-lauded market watcher shrugged off fears of a double-dip recession and pointed again and again to a series of charts showing economic gains since 2009.
"I've been an economist for 30 years. I've never heard of a double-dip before," Wesbury said. "It's made up."
For 2013, Wesbury predicted the Dow Jones Industrial Average would end the year around 15,500. It closed Wednesday at 13,511. He projected total economic growth at between 2 and 3 percent for the year and said unemployment would fall to around 7 percent.
Wesbury also said long-term lending costs would start to increase this year even though short-term rates would remain flat.
Commercial and residential real estate remain good medium to long-term investments, Wesbury said. Farm land, he said, had gotten too expensive.
Though optimistic about the economy, Wesbury tempered his talk with some sobering remarks about federal and state government.
The growth of government over the last decade has cut into the private sector, saddling entrepreneurs and innovators with a heavy load, he said.
"Our government is too big," he said. "Right now, today, the government is spending 22 percent of [gross domestic product]. Back when Lyndon Johnson first became president in 1965, it was spending about 17.5 percent of GDP. George Bush and Barack Obama have presided over a massive expansion of government."
He said that the bigger the government gets, the higher the unemployment rate will go.
He compared the government to a horse jockey. During the 1990s, the economy was a race horse ridden by a 112-pound jockey.
"Now we have a 250-pound jockey on our back," Wesbury said. "There's no way we can run that fast."
Asked specifically about the business climate in Illinois, Wesbury jokingly replied: "Leave."
Turning more serious, he said that the state's unfunded pension liability is a real concern.
The state has somewhere between $50 billion and $90 billion in unfunded pension liability. Based on his own calculations for DuPage County, Wesbury estimated that politicians had pledged 98 years of his future property taxes to pensions.
"That's how far out of balance we are right now," he said. "I don't know how [the state] keeps from defaulting on the pension promises that it has made. We are chasing businesses away by raising tax rates. We're going to end up having to raise tax rates even more, we still have $7 billion in unpaid bills [and] we do not have a balanced budget. ... Unless we change the course of these pensions, we're going to be in a death spiral."