Genetski: Government holding back growth
LAKE IN THE HILLS – Economist Robert Genetski said government burdens on the economy are holding back growth. He predicted a continued sluggish recovery until the government gets out of the way.
Genetski, a former chief economist for several financial institutions, spoke Wednesday at Home State Bank’s annual economic forecast luncheon at Boulder Ridge Country Club in Lake in the Hills.
“All we have to do to get some improvement is stop putting all those new burdens on the economy in any one year, and we’ll start to see our productivity advance,” he said. “It’s not that difficult.”
Genetski said his calculations put the cost of the Affordable Care Act at $150 billion a year, slightly less than the $200 billion annual cost of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
“These are huge burdens on the economy. These were really dumb moves,” he said. “And the economy is still growing. That’s the marvelous thing. It tells you what sort of strength is inherent in this economy that we can take these sort of burdens.”
He said the federal government’s monetary policies and its decision to place Fannie Mae and Freddie Mac under conservatorship in September 2008 set the stage for the financial crisis.
“Overnight, they made the decision to take $10 to $20 billion out of bank capital and within a week, Lehman Brothers failed,” he said. “Within two weeks, AIG failed, the auto companies failed, and we had the first financial crisis in this country since the 1930s.”
He compared the government’s effort to hold others responsible for the crisis to Capt. Renault’s order to “round up the usual suspects” at the end of “Casablanca.”
The question going forward, he said, will be how the Federal Reserve’s security buying affects the economy and financial markets. Genetski said he predicts it will eventually increase loans, investments, spending, inflation and interest rates. Once the recovery takes hold, he said he expects interest rates to increase “sharply over a short period of time.”
“My belief is we still have not seen a real pickup in spending in the economy,” he said. “As the recovery continues into the spring and summer, we’re likely to see the pace of spending pick up.”
He said spending could increase by 4 to 6 percent. He put inflation at 2 to 3 percent, the same as his estimate for real growth. The Dow could end above 18,200, an increase of 10 percent. He said both oil and gold were overvalued while there was room for growth in the housing market.
Genetski said growth opportunities in the future will be in businesses that can improve efficiency and save time for customers.
“The most important resource any of us has is our time,” he said. “From a business standpoint, any way that a business can save its customers time is going to be tremendously rewarded.”