Wells Fargo Senior Economist Mark Vitner smiles as he describes the U.S. economy as “the cleanest dirtiest shirt in the closet” when compared to Europe, but the very use of the term “dirty shirt” underlines his unease about what’s happening across the country.
In an exclusive, candid and sobering interview with WRAL on Thursday, Vitner said the U.S. economic recovery remains “vulnerable to shocks” such as the ongoing financial crisis in Europe.
After another wave of sober economic reports this week – such as fewer companies planning to hire and the Federal reserve forecasting little growth this year – Vitner warned that the rebound from the 2008 recession will continue to be a long, slow slog.
He doesn’t see a return to a recession at this time, but more trouble looms.
For example, if there is no deal on the “fiscal cliff” in Washington before 2013, he predicts a “harsh” recession.
The “fiscal cliff” is a term coined to refer to the looming end of Bush Administration tax cuts, the current reduction in Social Security withholding, and government spending cuts mandated by an agreement between Congress and the Obama Administration to raise the national debt.
If there is no agreement on an extension of the tax cuts and a delay in spending reductions, Vitner said a recession would hit next year.
Noting that the combination of taxes and spending reductions would cut “four to five points” off the national Gross Domestic Product and with the current rate at 2 percent a year, he said the GDP would decline some 3 percent.
“That’s pretty harsh,” Vitner said.
Vitner called for ‘real leadership” in Washington from either President Obama or his Republican rival Gov. Mitt Romney.
“Blaming Congress doesn’t cut it,” Vitner said, noting that people have complained about Congress “all the way back to Mr. Smith Goes to Washington,” the classic Jimmy Stewart movie.
Even if an agreement is reached, Vitner pointed out that the U.S. faces a two decade recovery from the financial crisis of four years ago with growth limited to 2 percent or so a year.
On a positive note, Vitner does see North Carolina’s economy growing faster than that of the U.S. – but not much more. He cited the state’s strengths as a lower cost place to do business, infrastructure such as ports that are underutilized, and the high tech and life science sectors. He also noted that the banking sector, largely based in Charlotte, also is recovering.