Why So Negative?

The Economy in 2016: On the Edge of Recession
By Robert Reich
Monday, January 4, 2016

I expect the U.S. economy to sputter in 2016. That’s because the economy faces a deep structural problem: not enough demand for all the goods and services it’s capable of producing.

American consumers account for almost 70 percent of economic activity, but they won’t have enough purchasing power in 2016 to keep the economy going on more than two cylinders.
…
Exports won’t make up for this deficiency in demand. To the contrary, Europe remains in or close to recession, China’s growth is slowing dramatically, Japan is still on its back, and most developing countries are in the doldrums.

Business investment won’t save the day, either. Without enough customers, businesses won’t step up investment. Add in uncertainties about the future—including who will become president, the makeup of the next Congress, the Middle East, and even the possibilities of domestic terrorism—and I wouldn’t be surprised if business investment declined in 2016.

I’d feel more optimistic if I thought government was ready to spring into action to stimulate demand, but the opposite is true. The Federal Reserve has started to raise interest rates—spooked by an inflationary ghost that shows no sign of appearing. And Congress, notwithstanding its end-of-year tax-cutting binge, is still in the thralls of austerity economics.