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Slower Growth, But No Recession?

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    RBS senior economist Michelle Girard gives her outlook for the economy.

  • Duration 3:54
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Thank you very much Jeff for that let's set.

Go back out of this talk about the fiscal cliff which you're talking about earlier certainly is that the market seemed to be focused on is Charles Payne.

Went -- a few minutes ago our next guest though says that while a deal most likely will happen on the fiscal cliff it will lead to slower economic growth.

The first half of next year so Michelle Girard joins a senior -- economists and RBS.

And she's in Stamford Connecticut how much -- what kind of growth next you talk about.

Well first I just wanna clarify it's not the fit the deal itself on -- is going to.

-- -- -- impact growth adversely it's the fact that I don't think -- deal is going to include two aspects the payroll tax cut an emergency unemployment benefits I think both of those are going to go away.

And I think that that could shave a percentage point Arab maybe even at present -- -- half off the -- GDP figure.

The impact that consumer spending -- it would be even more extreme so we think consumer spending for example in the first quarter.

Many very close to flat given the fact that there's gonna be -- -- that consumers are going to have lost an overall -- -- Micah 11 half 2% somewhat what kind of environment -- and yeah I guess Asian click I till I mean -- in the impact as really front end loaded in the terms the first part of the year for the whole year.

I think you know it takes probably about half a percentage point off growth so forward looking at a growth environment that's only about two and a half percent anyway.

Just these two factors alone could lowers to a 2% growth rate.

OK so then.

That we -- we -- have we don't have to do you have read the negotiations are just barely beginning so we do have -- time for this discussion of hey what's the best we can do we get a lot of kind of ideological answers that they.

You know the conservatives -- -- say talking about tax can't raise taxes -- -- do liberals in the same time are trying to protect the entitlements.

We're probably gonna get some Nixon are probably gonna get higher taxes maybe not as much as the president wants this one point six trillion number.

The -- data mentioned earlier it's it's it's of barely over trillion like you -- -- last time or something what's the best mix you can hope for now for the economy do you think.

Well I mean I -- I I think what the economy needs is certainty and so if you ask me the best thing we can hope for -- thirteen.

Would be a grand bargain you know going back to that four trillion dollar.

Ten year plan out Lotta people will argue almighty god that I felt awful lot of fiscal dragnet that would hit the economy at fourteen and fifteen and there's -- to that.

But I I have to say I think a lot of that.

Would be offset by I just think the removal of uncertainty if we -- let me kick in the can't -- businesses -- start thinking longer term plans.

I just think that any and net net that is -- that's what this economy needs is to finally be free of the uncertainty that has plagued it every step of the way of this -- Partners remember just -- people forgot the four trillion.

That the White House and talked about was actually twelve years.

And I was one of the issues with it as opposed and I intend so maybe that's Michelle says you come back to ten yet something since samples -- can exact and nine you're -- we can kind of but otherwise I mean we're a few years removed from the financial crisis -- are you relatively optimistic now immunity in these books written it's -- eight -- six years we should be out.

-- -- just forget about everything else is said that the economy will they'll solve itself and will be on the right track you think that -- we're getting we're getting.

Are we are getting -- but and you know it has taken it it's a long slow slog that I think we all have to admit.

I mean it was hit his head winds are diminishing I mean ha also been challenges are much stronger much more quickly that I think we anticipated they've paid down debt they're rebounding equity market -- helped.

Corporate balance sheets have been strong really since the beginning of the downturn -- cut back cut employment so sharply.

And I how sector I think has been a surprise here it's turned around more quickly home prices are rising.

I -- much ahead of what anybody thought so.

I think they're under they're there's good news out there as they said -- this economy could just you know go forward on encumbered with the uncertainty it's it's.

-- yes -- -- all easier said than done with a -- -- and glass half full Michelle -- has always thanks.

Thank you.

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