The economic recovery is under way, but in order for it to be sustained a number of factors need to occur, including an uptick in confidence and spending among consumers and companies, as well as growth in exports. And while we should be more optimistic in the short term, the economy still faces a number of hurdles in the long run. That was the message UCI Paul Merage School Dean Andrew Policano and nationally syndicated financial columnist Terry Savage delivered this morning to more than 800 local business and community leaders gathered at the Irvine Marriott for the Business Outlook 2011, a partnership program between the university and the Irvine Chamber of Commerce.
Statewide, Policano called California a "mess," due to factors such as the collapse of the housing market – which he said has yet to recover and continues to have a "negative drag" on the economy – as well as the public pension plan and a massive $25.4 billion budget shortfall.
And while the national picture is a bit better – Policano said we're beginning to see "sustainable growth" at a slower pace than in the past – the unemployment rate currently stands at about 16.7 percent, if the "discouraged and underemployed" are included. The U.S. needs at least 125,000 jobs per month to keep the market constant.
In terms of the GDP, Policano said growth will be between 2.8 and 3.3 percent this year.
Moving forward, Congress needs to step up at a national level to pass tax reform and get control over government spending, said Policano, who noted that the nation needs both fiscal stimulus AND fiscal restraint legislation in order to sustain economic growth.
In addition, the U.S. needs to focus on innovation and should "turn Detroit into our China" – or grow manufacturing in low-cost areas, said Policano.
Savage, an expert on personal finance and a TV commentator on CNN, CNBC, PBS and NBC, said innovation is the way forward.
"Don't bet against America," she said, adding that the nation will prosper again and “so will you.”
Savage said that “perspective” is critical when determining one’s next move. Comparisons between today and 1980 show that we’re in a much better place, she said.
“If you had given up in 1980 when the stock market was at 700 and layoffs among steel workers doubled unemployment, you’d have missed out,” Savage said. “Imagine me telling you back then that the stock market would be at 12,000.”
The commentary turned to what will make or break the U.S. economy. Savage said it will be less about the concerns of today and more about how our children will respond to seeing their earnings taxed for benefits such as social security that they will never enjoy.
The country’s greatest struggle, she claims, will come in the form of “generational warfare.” Savage added, “I think it has the potential to divide our county like nothing since the Civil War.”
'OC METRO Minute,' Jan. 27: Business Outlook 2011 took place this morning
Featured video: 'UCI's Andrew Policano – 2011'
O.C. employers cut 2,200 jobs in December