WASHINGTON — The U.S. economy has been doing poorly for so long now that it’s easy to get dispirited. But there are several reasons to think 2012 might be a good one for American economic performance.
The financial crisis of 2008 and 2009, and the subsequent recession, forced America’s private sector to go through a painful reinvention process. American companies had no choice but to make badly needed reforms. These are the kinds of transformations that companies often avoid during good economic times.
The result is an American private sector that is more productive and efficient than it has ever been. This has been a painful process for many American workers and their families who lost jobs or who faced an uncertain future. But the state of American business is strong today, with high profits and healthy balance sheets. This should serve the economy well this year and going forward.
The United States is also experiencing a major energy boom that is driving job creation. No, it’s not in trendy energy sectors such as wind and solar, which receive so much press attention.
Instead, major natural gas and shale oil finds are bringing a sense of optimism to parts of the old Rust Belt and the upper Midwest. Rail traffic has been a bright spot in recent months, with American railroads moving more goods.
As University of Michigan (Flint campus) economist Mark J. Perry (and fellow at the American Enterprise Institute) notes, “The materials moving daily around the country by rail are the ‘raw ingredients’ — coal, grains, chemicals, lumber, minerals, paper, iron, steel, etc. — of American industry that are being delivered to a company, factory or plant somewhere in the U.S. for the next stage of processing. Increases in orders for the inputs delivered by rail in 2011 will translate into increases in final output this year, which could also contribute to greater job growth in 2012.”
America is also leading the world in the development of state-of-the-art, fourth-generation wireless networks. These ultrafast communications platforms will likely provide an additional boost to the economy as companies such as Verizon, AT&T and others offer new services in 2012 and beyond. The telecom and Internet sector has been one of the few bright spots of the American economy and its growth is likely to continue. Of course, the problems in Europe are not going away any time soon as the continent wrestles with its sovereign debt crisis. The disintegration of the Euro would be a big shock and could mean a rough patch ahead for America’s economy.
But there is another possibility with respect to Europe, however. In some ways, the current troubles there could actually help the United States.
As my American Enterprise Institute colleague John Makin points out in a recent paper, “Although Europe will continue to struggle with its growing sovereign-debt crisis in 2012, the United States may benefit from the perception that its relative position is improving.”
Confidence matters greatly to economic success. If global markets increasingly view the United States as the safest place to invest and do business, this will help the American economy.
Where does politics fall into the picture? It is an election year, after all. Gridlock in Washington means major policy shifts are most likely off the table for the year. And the economy could well benefit from the resultant policy stability in Washington.
The election likely will turn on issues related to the domestic economy. We can hope that as the political parties compete for votes, they will be pressured to embrace policies that foster entrepreneurship, innovation and opportunity.
American voters, long frustrated over the last several years’ anemic economic performance, can cast votes for growth and a brighter economic future.
• Schulz is editor of American.com and a fellow at the American Enterprise Institute.