U.S. markets tumbled nearly 4% Thursday erasing any gains made in 2011 on fears that the U.S. and global economy are headed for yet another recession two years after the "Great Recession" ended.
Yesterday, I spoke with Glenn Hubbard, Dean of Columbia Business School and the top economic adviser to President George W. Bush during his first term, about the state of the economy.
The Good News
Hubbard believes the "likeliest outlook for the economy is one of very slow growth over the next couple of years" and not a full-blown recession. Slow growth means 2% to 2.5% GDP each quarter. Those numbers may seem doable and like reasonable growth, but it is really not enough to bring the U.S. economy back from the lows of the last recession.
He also firmly believes that there are things the government can do to help fix the dire state of the economy such as eliminate uncertainties facing the business community. One instance would be to snuff out any worries that taxes may eventually rise.
The Bad News
That bad news is that "risks have risen" and the economy is still very fragile and susceptible to major shocks, Hubbard says noting the reason for such weak growth over the last two years was due to the fact that the last recession was not like any other in recent history. "If there were to be a shock — a real problem in Europe another budget issue in the U.S. that could be enough to tip the economy into recession," he says.