Cobb Chamber of Commerce

1. Invention of the microchip. Computer industry, cell phones, laptops, etc. = One Trillion dollar industry
2. Globalization of the economy. China, India, Russia = 4.5 billion people become part of our economy.
3. Economic Policies: Marginal tax rate dropped from 70% to 35%. Inflation dropped from 14% to 2%. International free trade is adopted.
   
   

n Current federal economic policies are the wrong policies to grow economy.

n California is perfect example of way the nation is headed with current policies:

• Expansion of role of government more since the 1930’s.
• Anti-business sentiment. Businesses leaving state=less tax income.
• More government “give away” programs; unsustainable environmental restrictions. California has huge negative growth for foreseeable future.
  

n Nation lost 6% of its GDP from 2007 to 2009. Compared to 1980 to 1982 recession, which lost 2 % and the Great Depression, which lost 26% of GDP.

n Unemployment was 25 percent in the ‘30s. Currently, Georgia is at 10.2% and predicting 10.5%. There is a chance it could go to 11% by the spring of 2010.

n There is the possibility of a “double dip” recession caused primarily by three factors:

1. “Stimulus” dollars gone in 2011
2. Bush tax cuts expire
3. Possible increase in interest rates driving up inflation due to Federal Government spending.
   
   

n When recovery comes it will be sluggish at best. It will be a “jobless” recovery, keeping unemployment high, resulting in a lack of consumer spending to spur economy.

n Public policy is making problems worse:

• Stimulus dollars did not address the jobs issue, primarily pork barrel politics. Only $120 billion of $700 billion went to jobs. The rest went to states to address their issues.
• Current Healthcare proposal is a huge problem resulting in no hiring by businesses because of increased costs of providing insurance.
  
  

n Housing is 20% of US economy:

• From 2000 to 2007 2 million homes were built per year.
• 2008 800K homes were built. Approximately 550K will be built in 2009 and 700K in 2010.
• This downsizing of housing industry is felt throughout all sectors of the economy.
  
  

n Consumer spending is 70% of the economy:

• Households lost 22% of net worth in past two years. People are replenishing savings, not spending. Savings rate is up 4% from virtually 0% the past few years. Auto/truck purchases are down 30% from 2000 to 2007 levels.
  
  

n Tax Policies:

• Bush tax cuts will expire in one year. The marginal tax rate will increase 5%.
• This impacts spending and hiring.
• When the Bush tax cuts expire 50% of taxpayers will be paying 99.6 % of all federal income taxes. This is an untenable situation.
• Federal Government is set to increase taxes next year. Raising taxes on people in higher brackets will hurt people at the bottom. Workers suffer as people don’t purchase second homes. Hospitality industry suffers with less eating out, less travel, etc. Workers and job creation suffer.
• Taxes will be raised on interest and dividends. Medicare taxes will increase.
  
  

n Forecast for 2010:

• 2.5% to 2.7% growth. Real estate at bargain prices in N. Georgia
• Unemployment still at 10.5% by the end of 2010.
• Inflation less that 2%. Interest rates will have no large changes.
• Georgia underperforming relative to national average. Georgia GDP down 3.8% compared to growth of 2.7% nationally. There is a large glut of property in Georgia, residential and commercial. It will take a while to recover and absorb this inventory.
• In 2007 110,000 new homes built in Georgia. In 2009 fewer than 18,000 were built, while in 2010 the number is estimated between 32,000 and 33,000.
  
  

n Macro Economic/International Issues to consider:

• Globalization of business models will be critical in coming years. China and India are the main players. China has 400 million middle class citizens. (US have only 310 million total in population.) Huge purchasing power. This is the largest future market for electronics and automobiles. Nineteen million students in Chinese colleges today and will double to 40 million in 20 years. China will become the education leader. China and India are becoming the largest market for businesses that understand the possibilities and exploit the opportunities.
• From 1998 to 2007, China’s GDP grew by 9%, India’s by 6.5% and the US by 3.7%. China and India’s economic expansion will dominate global economic activity for the next 20 years. It is critical for US business to figure how to engage these expanding markets.
  
  

n Long Term Forecast:

• The long term forecast is excellent with positive population growth. Georgia will exceed national growth rate by 50%+. Georgia is only one of eleven states that will show strong economic growth. (GA, FL, NC, TX, AZ, NV, UT, ID, OR, WA, AK)
• Competitive advantages: Good weather, natural resources, pro-business climate, varied population, skilled workforce, low costs of labor and land, and good infrastructure.
• Georgia will add 1 million people through 2015. Georgia will become one of the top 5 or 6 states in terms of economic growth through 2030.
• With the opening of the Kia plant and the plans for NCR, Georgia is being favorably positioned for manufacturing.
• Hartsfield/Jackson International airport is a big plus in the future of Georgia.
  
  

   In summary, Dr. Niemi is predicting another 12 to 18 months of difficult economic times. Federal policies are a wild card that could exacerbate the problems of a positive economic recovery.