Despite conservatives' denials about income inequality and the validity of the Occupy movement's mission, recent surveys show that the protest's rallying cry—"We are the 99 percent"—strikes a chord with many Americans. The economic mobility that once seemed a basic feature of American life has faded away; the U.S. now stands behind Denmark, Canada, and Britain, among others, when it comes to social mobility—62 percent of Americans born into the top two-fifths of the income distribution stay in that bracket, a far larger sum than in Britain (30 percent).
Fed Chair Ben Bernanke has decided to release senior officials' short-term interest-rate forecasts, opening a window into the collective mind of the Federal Reserve. The forecasts will be released after the next meeting of the Federal Open Market Committee on January 25. It will include forecasts for the "likely timing" of the first hike of the federal funds target rate and "qualitative information" on the Reserve's war chest of bonds and securities. The Fed likely hopes that by releasing this data, it can encourage much-needed economic growth by guiding investors' expectations and staving off worries about interest-rate changes.
If you look at the forecasts, Europe and the U.S. are starting 2012 off on different economic trajectories. Europe is heading for a near-inescapable second recession after manufacturing output dropped in December for the fifth straight month. The United States, on the other hand, seemed to be on the upswing in December—the job and housing markets improved, the payroll tax cut was extended (finally), and consumer spending rose. “There is a sense of decoupling,” Maury Harris, chief economist at UBS Securities, toldBloomberg Businessweek.
Pundits can't decide whether the future looks bright for the American economy, or the new year will bring doomsday. On the positive side, unemployment compensation claims are at their lowest levels in more than three years, housing sales are up, the stock market is making a comeback, and confidence in the economy is growing. On the negative side, there's Europe. If the continent drops into a big recession, the United States is in danger of losing the small economic gains it won in the past year.
Congress had debt on the brain in 2011—fights over the debt ceiling, the Supercommittee, the Bush tax cuts, and voucherizing Medicare—but it amounted to just talk. It was a weird issue to focus on in the year before a big election, since most voters find unemployment and the general economy more important problems to tackle than the federal deficit. And, it turns out that this obsession with the debt was a bad idea for more than Congress' approval rating.