If the last three years were marked by rampant pessimism due to the U.S. economic recession, and 2011 was defined by continued uncertainty because of the European sovereign debt crisis, is there any hope for 2012? According to a recent editorial by Paul Krugman in the New York Times, there are signs that 2012 could see a continued recovery, even though unemployment remains high and the housing market is still flat.
Still, an accelerated recovery will depend on a number of factors besides just cautious optimism. Last week on FORA.tv, the Commonwealth Club hosted a pair of former top presidential advisors who spoke on what it will take to get the economy back on track.
According to Dr. Michael Boskin, former chairman of the Council of Economic Advisors under President George H. W. Bush and current Hoover Institution fellow, the road to economic recovery in the United States is still largely dependent on what happens in Europe. “Because of our trade and banking ties, a catastrophe in Europe would severely affect the American economy, and also the global economy,” Boskin said. Though a worst-case scenario is unlikely, the best-case scenario is that Europe will “muddle through” next year with low economic growth and the potential for catastrophe still looming over the continent.
But the U.S. can’t rely on a wait-and-see approach that is dependent on European fortunes. Christina Romer, former chairman of the Council of Economic Advisors under President Obama and current economics professor at the University of California at Berkeley, said that the amount of new jobs the U.S. is currently creating is not making up for the massive losses we incurred in 2007 and 2008: