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Will Tax Hikes Hurt GDP Growth?

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    IHS Chief Economist Nariman Behravesh on the outlook for the economy.

  • Duration 3:42
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December durable goods orders as we've been talking about came in better than expected -- -- survey by the -- be showing that economists are increasingly optimistic about 2013 -- is the US economy.

Gaining momentum when joining us now is I think his chief economist -- -- Barack buyer of -- Merriman thank you for joining us.

Are so look it all seems to be pointing in the right direction doesn't -- the markets don't always necessarily reflect what's going on with the economy.

But the latest business survey from the national association for business economist looks for GDP growth this year -- anywhere from two to 4%.

Is that a little optimistic that we getting carried away a little bit.

Well certainly is 4% as optimistic.

Our view is the underlying growth rate in the first half of the year -- still probably only.

One and a half to 2% by the second half of the year it's closer to 3% may be a little bit higher at 4% as a little tad optimistic.

That said there's going to be one little bump on the road and that is that.

That the GDP numbers that will come out on Wednesday.

Will show a very weak fourth quarter somewhere between zero and half a percent.

The markets -- may not take too well to that but that's a fluke.

But that that will be a little bit of a bump along the -- it doesn't mean we're headed back to recession now.

Are you worried that they tax hikes in the all the increase in tax rates on the wealthy are gonna put a bigger damper on GDP than anybody is anticipating.

Well ironically is not the tax hikes on the rich that are gonna hurt.

It's the increase and they and the payroll tax taxes gonna have the biggest impact -- -- is is that probably gonna shave a half a percent -- growth.

In 2004 also without it.

Growth would have been half a percent higher the tax increases on the rich will hurt but not quite as much this year as -- subsequent years.

You know talking about the housing market we saw pending home sales declining in December for the first time in I think is for months now.

The housing recovery has been excruciatingly.

Slow there is a lack of inventory out -- I mean could that throw a wrench.

In the works with regard to the overall economy and its recovery.

Well it's always possible but I think our view is that deep housing market will continue to improve this year.

That pending home sales number got a bit of a fluke in the sense that there was a surge of buying having to do with the -- the mortgage forgiveness program.

And that the December number that we saw that drop was probably gonna pay backs -- that's a little bit of a fluke I wouldn't again read too much into that number.

-- sort of let you go I know -- rabbit -- does tell us what at what you come away with there I mean I know there's a lot of talk about big energy boom going on in North America.

Well clearly that's one of the most positive stories that came out of Dallas we were a lot of the messengers of that message if you will in the sense that we had a breakfast on Friday morning.

Focusing on that but the overall -- -- I would say is one of relief.

That that world economy dodged a lot of bullets.

Fiscal -- you know you eurozone meltdown -- China hard landing but also some sense of caution about what to expect next you know what can we expect.

From the congress US congress this year what's gonna happen with the Italian elections the German elections still a lot of uncertainty out there.

That -- -- and that's actually something that we seem to blast on the radar right -- Europe.

Absolutely well it's been very quiet which can be ominous spike some people stood exactly they have spenders but hopefully -- wolf.

Continued to slowly recover as well thank you so much -- -- -- -- show with I HS.

Thank you so much for joining us we appreciate it.

My pleasure.

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