Taking stock | Economist says uncertainty impeding growth
As president of the National Association for Business Economics, Lynn Reaser rubs elbows with plenty of notables in the U.S. Treasury Department and The Federal Reserve. So when she speaks, as she did recently at a gathering of Bangor Savings Bank wealth management clients, people tend to listen.
Reaser brought her 2010-2011 economic forecast to the Portland event, stressing that uncertainty is the hobgoblin of American business. Despite historic low interest rates, which Reaser doesn’t see The Fed raising substantially over the next year, businesses are not hiring or expanding “because … they don’t know what will happen with policies around health care and tax reform. Two-thirds of labor costs are in benefits, not wages,” she says. She expects as the recovery progresses, businesses will begin to slowly add jobs, bringing the national unemployment rate of 10% to 8.5%.
Her advice: Lock in long-term financing to take advantage of low rates; tilt investment portfolios from bonds to stocks; prepare for possible tax changes; use social networking sites (“your marketing strategy of two years ago is now obsolete”); and rethink your business model to invest in people and technology. Specific to Maine, she suggests the next governor “be bold” and enact a moratorium on regulations to give Maine businesses a chance to breathe and regain some of that elusive certainty.
Her worries: A federal balance sheet that before the financial crisis in the fall of 2008 was $900 billion and today has ballooned to $3.3 trillion, and growing animosity from trading partners who are not happy about the dollar’s continued devaluation.
The brightener in her forecast? Reaser says small business “will be the salvation of this economy… We bash you all with tighter credit, more taxes and regulations … and you still have this huge drive to own your own companies and innovate,” she says. “Government policies will help, but the energy of small business and entrepreneurs will keep this U.S. economy quite strong.” Carol Coultas
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