Tags: Ross | US | Economy | collapse

Wilbur Ross: U.S Economy to Stumble Along

Thursday, 04 Aug 2011 08:49 AM

The U.S. economy should avoid outright collapse but will plod along at best, a far cry from the more robust growth many were expecting for the second half of this year, says investor Wilbur Ross.

The deficit-reduction deal recently attached to raising the country's $14.3 trillion debt limit wasn't a total success or a total failure either, although frustration with the process may spark an anti-incumbent sentiment as 2012 elections draw near.

"I don't think the economy is going to collapse. My feeling has been it's just going to stumble along: one month will be good, one month will be bad," Ross tells CNBC.

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Wilbur Ross
(Getty Images photo)
"There's no real lift to it, there's no real direction."

While many economic indicators continue to fall below expectations, including gross domestic product growth rates and unemployment figures, there is some good news out there.

"Some of the good things that are going to be good in the longer term are already starting: the gradual increase in savings rate. For years economists have said Americans spend too much and don't save enough, and they were right. Now Americans are starting to save a little more and they're saying 'Oh my God! They're not spending.'"

As a role model, the U.S. could look to Ireland.

Ireland faced a similar problem to that of the United States in that it carried too much debt coming from a financial crisis. So what did Dublin do?

"They cut the entire cost of civil service 13 percent in one shot. No country has ever done that. Second they pretty well cut out all government-funded capital expenditures, and they cut a lot of the social payments, the transfer payments. And lo and behold, the sky didn't fall," Ross says.

"Their economy actually was up a little bit in the June period. So all the naysayers that say if you really cut out government spending, the world would collapse — that didn't happen."

Focusing on the debt ceiling agreement, Ross applauds processes in the agreement that automatically cut spending in the event of deadlocks.

"At least there is the automatic default into the $1.2 trillion deductions. So that's a good thing because it means there will be some further progress. But it's really going to result in a big anti-incumbency attitude on the part of the public. People hated going through it," Ross says.

Ross did not say whether that would mean an end to Barack Obama's presidency.

He did say, however, that since the far right and the far left opposed many terms attached to raising the debt ceiling, the overall compromise package was probably a good deal.

"The hardcore people on both sides are very dissatisfied and maybe that says it was a proper deal," Ross says.

"Usually if both sides are a little dissatisfied, it means you came at out something like the right place. But we realize the Senate has not passed a budget in two years. Why are we hiring these people?"

Others agree that no side clearly won but none was held with a short shrift as well.

"Everyone came out of this tainted, but nobody was really crippled," says Cal Jillson, a political scientist at Southern Methodist University in Texas, according to Reuters.

"Everybody, globally and domestically, just feels enervated by the whole process. It's over, the worst didn't happen, but it's difficult to see how you start an upward arc from here."

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The U.S. economy should avoid outright collapse but will plod along at best, a far cry from the more robust growth many were expecting for the second half of this year, says investor Wilbur Ross. The deficit-reduction deal recently attached to raising the country's $14.3...
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Thursday, 04 Aug 2011 08:49 AM
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