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Letter to the editor

Economist offers ray of hope amid gloom

Surrounded by recession fears, one expert spreads a little cheer about the economic outlook.

By HELEN HUNTLEY, Personal Finance Editor
Published January 24, 2008

While the politicians in Washington were working on tax breaks to rev up spending and skittish investors were alternately sending stocks plunging and soaring, Wachovia economist Mark Vitner was spreading economic cheer in the Tampa Bay area Wednesday.

His take: Concerns about the economy are overblown.

"There is no way the U.S. economy can be in a recession," he said. The financial markets may be ailing, but he said the economy is still growing, albeit barely, and that it will start perking up in a few months on its own. Wachovia is forecasting 2 percent growth for the year.

And Vitner discounted talk that Florida's housing market has to get better for the state's economy to improve; all it has to do is stop getting worse. Housing starts, he noted, can't go below zero.

"I think we've gotten through the most painful part of the correction," he said. Vitner said he expects home prices to level off this year, but said we're due for three to five more years of little or no price appreciation.

Vitner said stocks are "priced for a recession" that won't arrive. While he was delivering his message to bank customers in Tampa and St. Petersburg, Wall Street was off to another day of heart-stopping drops and dizzying climbs. After being down more than 320 points, the Dow Jones Industrial Average rallied to close up 298.98 points, a remarkable swing of more than 600 points.

Vitner praised the Federal Reserve Board's decision to cut short-term interest rates 0.75 percent Tuesday morning as "absolutely right" to help maintain the integrity of the financial system. He said he expects another half percentage point cut when the Fed's Open Market Committee meets next week.

In contrast, he had no praise for the economic stimulus package being crafted in Washington.

By the time the proposed tax rebates could arrive, the economy already should be getting better on its own, he said. So why are politicians pushing for them? "They know the economy will strengthen the second half of the year and they want to make sure they get credit for it," he said.

Other forecasts: The dollar will strengthen against the euro and the Canadian dollar, gold prices and Chinese stocks are headed for a fall, and income taxes for the wealthy are bound to go up in the long term no matter who wins the election.

Helen Huntley can be reached at hhuntley@sptimes.com or (727) 893-8230.

[Last modified January 23, 2008, 23:07:46]