Measured optimism

MEASURED OPTIMISM…. By the middle of spring, plenty of folks watching the economy were feeling relatively good. Economic growth in the first quarter was pretty strong, and in April, we saw more jobs created than at any point in four years. Conditions appeared to be improving so much, Karl Rove, National Review, and other media conservatives started working on ways to ensure Democrats didn’t get credit for the recovery.

It didn’t last. A variety of factors, most notably the European debt crisis, rattled global markets, growth slowed, and job creation stalled.

As 2010 comes to a close, however, we’re once again seeing some sun peek through the clouds. The Wall Street Journal reports this morning, “As the economy gradually recovers, some big U.S. companies are cranking up their recruiting and advertising thousands of job openings.” The New York Times added that a growing number of economists are expecting a stronger 2011.

Eighteen months after the recession officially ended, the government’s latest measures to bolster the economy have led many forecasters and policy makers to express new optimism that the recovery will gain substantial momentum in 2011.

Economists in universities and on Wall Street have raised their growth projections for next year. Retail sales, industrial production and factory orders are on the upswing, and new claims for unemployment benefits are trending downward. […]

Even so, economists are increasingly upbeat about the outlook, saying that while the economy in 2011 will not be strong enough to drive unemployment down significantly, it should put the United States on its soundest footing since the financial crisis started an economic tailspin three years ago.

Phillip L. Swagel, who was the Treasury Department’s chief economist during the administration of George W. Bush and teaches at the University of Maryland, said, “The recovery in 2011 will be strong enough for us to see sustained job creation that will finally give Americans a tangible sense of an improving economy.”

The rationale for “measured optimism” isn’t without evidence. The job market is improving, as is consumer confidence. Private-sector profits are up, and some additional stimulus is now on the way.

Caveats, however, abound. The situation in Europe remains precarious, and in the U.S., state and local governments are still facing massive problems, as is the still-struggling housing market.

And there’s one other thing that gives me pause: congressional Republicans. What will/would a government shutdown do to the recovery? What about the international shockwaves of a GOP push not to raise the debt limit? Just how negative will the consequences be if/when Republicans slash spending, focus on deficit reduction instead of growth, and take billions out of the economy?

I’m delighted by the optimism, and I sincerely hope the predictions are true. But I can’t help but wonder the extent to which Republicans, deliberately or not, might screw this up.