Dhawan, who is Georgia State University’s economic forecasting center director, said he is optimistic for fiscal clarity by the end of the year because both political parties are feeling weak.
“If either side has an advantage, it’s not going to get done,” he said Thursday at the Buckhead Business Association’s weekly breakfast at the City Club of Buckhead. “Settlements only happen when both sides weaken up and that is the way I see it right now.”
He said Republicans have still not come to terms with losing the presidential election, and the Democrats are “caught up in scandals.”
“That is why the deal will get done. I’m an optimist in that sense,” Dhawan said.
He also said car sales and home sales will continue to increase significantly throughout the year.
“New home sales have crept up from the bottom and doubled from a year ago, but they’re still nowhere near old numbers,” he said.
And as a result of the 2008-2009 economic downturn, Dhawan said Americans have created the “new normal,” as caution on spending rose exponentially.
However, job growth will remain stagnant throughout the year because companies are not ready to expand, or take on new projects and investments, Dhawan said.
“They’re not in the mood to lay off people like in 2008, but they’re reluctant to speed up the boat,” he said. “Job growth only picks up when new things are going on.”
Our fortunes also depend on what happens in rest of world, Dhawan said, and China’s economy is currently stalled.
“I cannot do a forecast without worrying about what China is up to,” he said. “They are trying to jumpstart their economy and it’s not working so far.”
He said Americans should to be concerned with China’s stalling economy because new American-built manufacturing plants will have no one to sell to.
“China is our biggest buyer,” he said. “We used to run the whole show 20 years ago, … but now we have to keep an eye on when China’s going to get back on track again.”
But Dhawan said Americans can handle the “headwinds from abroad,” and the issue is accelerating economic growth here in the future.
One association member asked, “I know the theory is we must have growth but what’s wrong with having a steady income and stability?"
In response, Dhawan said if businesses would like to be back up to par revenue-wise, as they were in 2007 and before, acceleration must occur.
“The train left the station in 2008. Now how do we handle the tracks? We are there now,” he said. I'm just telling you what the speed of the train would be on the tracks based on fundamentals.”
And to just maintain the economy now, a fiscal budget deal, or a “cleansing of the train’s engine,” must happen, Dhawan said. Or in his words, our first prayer must be answered.