Recent retail sales data indicate economic growth is shifting down a gear from the 2.7 percent pace set during the third quarter. The consensus of forecasts indicates growth slowing to below 2 percent in the fourth and first quarters—my submissions to those polls were 1.7 and 1.4 percent, respectively.
For all of 2013, the economy will be hard pressed to accomplish the 2 percent growth registered this year, and unemployment only will continue falling if more adults opt out of the labor market or settle for part-time work.
This forecast depends on a "fiscal cliff" agreement that imposes only moderately higher taxes and at least some veiled attempt to curb spending. (Read More: Boehner Blinks, Opens the Door to Tax Hikes on Rich.)
On spending cuts, this economist is from Missouri, which will be hit hard with defense cuts if a deal isn't reached. President Barack Obama and his allies in Congress simply won't accept that entitlement spending is out of control. Such cognitive dissonance colors long-term prospects, even as revealed by forecasts coming from Democratic economists.
Should the president succeed in obtaining an immediate $100 to 150 billion in new taxes, and Republicans obtain a similar-sized quick cut in spending, brace for a recession. With so many folks already unemployed or underemployed, it could be difficult to lift the economy off the mat again, even with trillion dollar deficits.