Chamber of Commerce bullish on economy, if Congress stops ‘wounds’

The nation’s preeminent business association said Friday that it is bullish on the economic outlook for 2013 and urged lawmakers to stop "self-inflicted wounds" that could dampen robust growth.

The U.S. Chamber of Commerce said Friday that even if a scheduled $85 billion in automatic cuts go into effect this year, gross domestic product should grow at an average of 2 percent — 0.6 percent stronger than that seen by the Congressional Budget Office this week.

ADVERTISEMENT
Economist Martin Regalia said he sees 1.7 percent growth in the first half and up to 2.7 percent growth in the second half of the year, based on fundamental strength in housing and energy.

“We have the potential to finally break out of the doldrums and get above 2 percent to 2.5 percent growth, and significantly so,” he said. “Our policy options are what’s holding us back.”

Reglia said that the government needs to avoid corporate tax increases this year and cut discretionary spending in a more gradual fashion to increase growth.

“Sequestration and the end of the payroll tax holiday probably saps around one percentage point,” he said. “I am more rosy than CBO this year.”

Regalia argues that the economy can absorb the automatic spending cuts but they should happen through ordinary appropriations prioritizing. 

The Chamber is less rosy than CBO when it comes to interest rates and inflation, and sees both ticking upward sooner as growth accelerates.

“My inflation forecast is that the Fed is going to have to start thinking how to maneuver themselves by the end of the year,” he said. 

He blasted Senate Democratic attempts to count past spending cuts in order to argue they now need to be offset by new tax increases.

“It has been a bait-and-switch,” he said. 

Regalia made his comments at the Chamber’s quarterly economic briefing.

At the event, economist Frank Nothaft of Freddie Mac presented a glowing picture of the housing market.

“This is the most upbeat I have felt in years,” he said.

Nothaft said that much of the vacant housing supply has been reduced and that he sees as much as a 10 percent increase in a category of home mortgages for less qualified borrowers. He urged the White House to accelerate completion of housing finance regulations to stimulate the sector. 

John Felmy of the American Petroleum Institute said that demand for petroleum products was down in the fourth quarter of 2012 but that it appears to be an aberration, with gas demand ticking back up this year. He urged President Obama to approve the Keystone pipeline from Canada, accelerate leases and drop plans to end tax breaks for oil companies to accelerate growth.

Bob Costello of the American Trucking Association said that he was “not overly concerned” with low GDP growth at the end of last year and that he expects positive growth for trucking as businesses replace diminished inventory. 

He urged Obama to push for more infrastructure spending in the State of the Union.