True, the economic forecast for 2013 calls for heavy fog. But that fog will be punctured by rays of sunlight to nurture growth once the U.S. government solves its debt crisis.
That was the mixed message offered by a panel of four speakers Thursday for the 2013 Economic Forecast at the Ramada Inn, hosted by the Greater Watertown-North Country Chamber of Commerce and sponsored by RBC Wealth Management, Community Bank and Hancock Estabrook.Speakers were Michael A. Arcuri, attorney for Hancock Estabrook of Syracuse and former U.S. congressman; Anthony G. Collins, president of Clarkson University, Potsdam, and co-chairman of the North Country Economic Development Council; Nicholas Verbanic, vice president of Community Bank subsidiary Nottingham Advisors, and Cyril Mouaikel, Watertown branch manager of RBC Wealth Management.
Though plenty of positive things were said by these specialists, words such as uncertainty and instability cropped up frequently in their speeches. Mr. Verbanic, for example, said todays debt debate on Capitol Hill needs to be solved to encourage consumers, investors and business owners to start spending. But partisan squabbling has continued about raising the nations $16.4 trillion debt ceiling. Heavy budget cuts that still loom, related to the so-called fiscal cliff, only add to the uncertainty, he said.
Federal spending now amounts to 24.5 to 25 percent of gross domestic product, Mr. Verbanic said, but revenues amount to only 19.5 to 20 percent of GDP. Over the past five years, the Federal Reserve has quadrupled its purchases of government bonds as a way to lower interest rates artificially so they remained competitive.
As a consequence, the Reserves assets jumped from about $700 billion to $3 trillion during that time; the agency continues to buy bonds to the tune of $85 billion per month.
Theyve done this to buoy the market, but each round of spending has had less effect, Mr. Verbanic said.
Because of what he called the federal governments profligate spending habits, he predicated that 2013 will see a black swan a sudden, catastrophic event that causes the stock market to tumble. But investors who are prepared for that trend, he said, can be ready for it when the market bounces back.
The market always goes up on an escalator, but goes down on an elevator, he said. These events come out of the blue and disrupt markets, and I expect were going to wake up one morning in the next couple of months to see the stock market drop a couple of hundred points. But in that lies an opportunity, maybe by taking a defensive investing stance and being prepared for when that black swan arrives knowing what you will do with your capital.
A financial collapse could be avoided, though, if Congress puts politics on the back burner and makes meaningful cuts in entitlement and health care spending, Mr. Verbanic said. The U.S. has a genuine opportunity in 2013 to do the right thing to make sure spending is under control, and then open up the floodgates of corporate spending.
Mr. Collins said the pot of $90.2 million in state funding received in December by the North Country Economic Development Council indicates the seven-county upstate region is flourishing.
That pool of funding will be used to spur job creation for 82 projects. Major projects awarded funding include the ReEnergy Black River biomass facility planned at Fort Drum, the proposed 105-room Clayton Harbor Hotel and a large 364-unit apartment project proposed in the village of West Carthage to serve Fort Drum.
Mr. Collins attributed the regions success to the high level of cooperation involved to select proposed projects. Everyone on that council has done an amazing job sticking together, he said, and thats been our driver for success.
The north country may be better poised for business than any rural part of the country, he said, because we stay tight as a seven-county region and advocate for projects together.
One major hurdle that prevents New York from being business friendly, Mr. Arcuri said, is its plethora of cities, towns, villages and special districts.
While the state had about 2,000 municipalities in 1940, that number has skyrocketed to 10,5000 today. Texas has a population of 25 million, greater than New Yorks 19 million, yet Texas has only about 4,800 cities, towns and special districts.
With all things being equal, is a business going to stay in New York or go somewhere thats much more simple to do business? Mr. Arcuri asked. We need to continue to pressure local (municipalities) to study consolidation opportunities.