The U.S. economy needs more clarity from lawmakers about taxes and spending to reverse flagging growth, not more government stimulus, said John Silvia, chief economist at Wells Fargo Securities LLC.
The recovery in the world’s largest economy is at risk because consumers and businesses don’t know how lawmakers will adjust federal spending and taxation in order to pass a budget this year, Silvia said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.
“We just need some clarity, we need Congress and the president to get together and say ‘listen this is what we’re going to do’” about the payroll tax cut, Bush tax cuts, estate taxes and discretionary spending, Silvia said. “You don’t need another stimulus. We just need people getting together and saying ‘here are the rules and here’s what 2013 is going to look like in terms of taxes and spending.’”
The Charlotte, North Carolina-based economist said he expects growth of 1.5 percent to 2 percent in the second half of this year, while the unemployment rate will probably end 2012 at around 8 percent to 8.2 percent. Wells Fargo & Co.’s mortgage unit is the largest in the U.S.
The economy grew more slowly in the first quarter than previously estimated, expanding at a 1.9 percent annual rate, down from a 2.2 percent prior estimate. The jobless rate rose to 8.2 percent in May from 8.1 percent for the first increase since June 2011.
“Firms have to see that they can make profits doing something, that they can see an opportunity and pursue it,” Silvia said. “And right now a lot of firms are geared up for 2 percent growth, they don’t see 2.5 or 3, so they don’t see the reason to expand and that’s why you’re getting a slowdown in investment, especially for equipment and software, and a slowdown in employment.”