Economist warns of other problems beyond 'fiscal cliff'

By Nick Coltrain Morris News Service ATHENS, Ga. – While federal lawmakers fret over how to reach a spending agreement before plunging over the "fiscal cliff" - a slate of spending cuts and tax hikes set to take effect Jan. 1 - Wells Fargo Senior Economist Mark Vitner warned Monday the economy might also crash into a wall. The shadow of the cuts, which the Congressional Budget Office warned could lead to another recession, means businesses are acting cautiously with plans for growth, Vitner told members of the Georgia Legislature meeting at the University of Georgia for a briefing prior to Jan. 14 start of the 2013 legislative session.
Vitner used the analogy of driving through a town's known speed trap and the motorists don't know the speed limit. In that case, it only makes sense to hedge closer to 15 mph than 35. But once motorists are out of that danger, it also makes sense for them to speed back up, he said. "Once the fiscal cliff gets into the rearview mirror, I think we're back at 2.5 percent (economic growth), which is what we were at before," he said. "Maybe it will be even higher because housing is starting to pick back up." The economist also agreed with U.S. Sen. Saxby Chambliss that President Barack Obama will win out in the negotiations and let the tax cuts pushed by President George W. Bush expire for those making more than $250,000 each year. If Obama and the Republicans in the House of Representatives don't reach an agreement, Vitner predicted two rounds of credit-rating cuts for the United States. Leaders need to solve the debt crisis in coming years, he said. "At best, we have four to five years to deal with that issue. Maybe three or four," he said. The higher the deficit-to-spending ratio gets the greater chance of long-term stagnation. But it also isn't something Vitner thinks should happen overnight. "If we were to balance the budget tomorrow ... it would be horrendous," he said. The stimulative monetary policies being exercised by the Federal Reserve also gave him pause and reason enough to predict inflation creeping up. "It's not going to be crazy, bring-a-wheelbarrow-to-the-grocery-store inflation, but it will be a bit more than people are used to, which can be a real problem in an economy where we're just not growing too fast," Vitner said. The ongoing issues with European economies and the Euro will also contribute to sluggish growth, he said, as they have less money to invest. But Georgia, Vitner added, is fortunate that its major international trading partners are in Asia.


More Local

Gravel truck overturns on Hwy. 29

Authorities closed North Highway 29 for more than an hour Monday afternoon after a dump truck overturned and spilled gravel across the road. ... Read More


10 Things to Know for Today

Your daily look at late-breaking news, upcoming events and the stories that will be talked about today: 1. POLICE DEPARTMENTS ON ALERT AFTER ... Read More


Boys & Girls Club

NHS student one of top youths of year

After months of preparation, a Newnan High School student was honored as one of the top youths of the year by the Boys and Girls Club of Met ... Read More


Senoia Redneck Gourmet to close

After six successful years, Casey Smith has decided to close the doors of the Redneck Gourmet in Senoia. As the owner of both the Newnan and ... Read More


One Roof thrift store reopen Jan. 5 in new location

Friday was One Roof’s last day at its former location in the old Playtex plant on Temple Avenue. The organization's thrift store will ... Read More

Movie studio decision could have 'chilling effect'

The planned Christmas Day release of “The Interview,” staring Seth Rogen and James Franco, has been cancelled due to threats of ... Read More