\nChris Sieroty, Las Vegas Review-Journal \u00b7 February 19, 2014 at 3:53 pm<\/p>\n
\tWhile there are risks to the economy locally and nationally, the fundamentals behind the recovery are good and have improved tremendously over the last few years, according to an economist with Beacon Economics.<\/p>\n
\tChristopher Thornberg, a founding partner at Los Angeles-based Beacon Economics LLC, and Bruce Simon, City National Bank\u2019s chief investment officer, presented their forecasts Wednesday at the bank\u2019s 2014 Economic Forecast and Market Update.<\/p>\n
\tThornberg expected U.S. growth of 3 percent to 3.5 percent this year. He said Nevada took a double whammy during the recession from subprime loans and a resulting decline in gambling and visitor revenues, as many California residents also suffered from subprime loans.<\/p>\n
\tSimon said bankers tend to be more conservative, with City National\u2019s estimate for U.S. growth this year at 2.5 percent to 3 percent. Simon said \u201cfive years out of recession\u2026 we are returning to a more (stable) environment.\u201d<\/p>\n
\t\u201cNevada and Las Vegas are turning the corner,\u201d Thornberg told about 120 people gathered in a ballroom at the MGM Grand. \u201cWe expect 2014 to be a good year, with 2015 being an even better year.\u201d<\/p>\n
\tHe said 2013 ended on a strong note, with consumers moving beyond the payroll tax hit in the second half, exports growing, and state and local governments starting to see improvements in fiscal health and hiring.<\/p>\n
\tThornberg cautioned that there are still issues restraining growth. Among them were bank credit remaining tight, consumers still not saving enough and needed long-term entitlement reforms.<\/p>\n
\tThornberg also said he didn\u2019t expect the Federal Reserve to \u201cturn around and crank up the federal funds rate\u201d anytime soon, as it\u2019s still unwinding its fiscal stimulus. On Wednesday, the fed funds rate, or interest rate at which banks lend money to each other, was 0.25 percent.<\/p>\n
\tThornberg said there was good news for Nevada\u2019s economy. He said the employment picture continues to recover, with payrolls increasing 1.8 percent year over year, while the 8.8 percent unemployment rate is down 1 percent, but still above the national average.<\/p>\n
\t\u201cIt\u2019s not just gaming, the economy has been expanding over the last few years,\u201d he said.<\/p>\n
\tAccording to data compiled by Beacon Economics, hospitality-food service is still 18.3 percent of the local job market, but finance and insurance has grown from 8.3 percent in 2001 to 12.4 percent in 2012.<\/p>\n
\tThornberg said transportation, manufacturing, health care and professional services are all sectors of the local economy that continue to expand. He expected that trend to \u201ccontinue over the next three years.\u201d<\/p>\n
\tBut to get to a full recovery, or close the gaps in the economy, Thornberg said, \u201cfirst you need to know where the gaps exist.\u201d<\/p>\n
\t\u201cIt\u2019s not taxes, it\u2019s not blue states, it\u2019s not red states, it\u2019s not Obamacare,\u201d Thornberg said. \u201cIt boils down to three points of the economy. Construction as part of GDP was 9 percent before (the recession), today it\u2019s 6 percent.\u201d<\/p>\n
\tHe said the country still has to deal with its trade imbalance and government expenditures.<\/p>\n
\t\u201cI\u2019m not talking about unemployment checks, food stamps,\u201d Thornberg said. \u201cWhat I\u2019m talking about here is actual investments in public service, roads, bridges, infrastructure, schools. All the stuff we call public investments. Those are still considerably lower than they were.\u201d<\/p>\n
\tThornberg, a former chief economic adviser to the California State Controller\u2019s Office, discussed the federal government\u2019s trillions of dollars of debt and the impact of the Affordable Care Art, which he described as \u201cnot the issue.\u201d<\/p>\n
\t\u201cI realize there is a group of people out there who are very sure the debt is an enormous issue for our economy,\u201d Thornberg said. \u201cBut it really isn\u2019t. Yes, there is $15 trillion of debt outstanding \u2026 of that outstanding debt, 40 percent, or $6 trillion of it, is owned by the federal government.\u201d<\/p>\n
\tThornberg said 30 percent of the debt is held by the Social Security trust fund, while the Federal Reserve holds 10 percent. The actual amount being held outside the U.S. is 60 percent, which he described as \u201cnot a crisis, folks.\u201d<\/p>\n
\t\u201cIt\u2019s not a crisis by any stretch of the imagination,\u201d Thornberg said. \u201cWith the deficit closing on its own and higher taxes \u2026 we are OK.\u201d<\/p>\n
\tIn terms of health care, Thornberg said it\u2019s not about the Affordable Care Act, also known as Obamacare, because \u201cif you sit down and run the numbers, the (ACA) on one level makes sense.\u201d<\/p>\n
\t\u201cYou have a car, you are supposed to have insurance,\u201d he said. \u201cYou have a house, you should have fire insurance. If you are alive, shouldn\u2019t you have health insurance? The individual mandate at some level makes economic sense.\u201d<\/p>\n
\tThornberg said while you can argue about the Affordable Care Act, it doesn\u2019t work on one fundamental level, bringing down costs. He said the U.S. spends on average $8,608 per person per year.<\/p>\n
\t\u201cOur real problem with health care is that we are spending 40 percent more per person, per year,\u201d Thornberg said. \u201cThat is the problem. We are overcharged and overconsume and nothing in the Affordable Care Act deals with (it) and until we ask real questions \u2026 the health care crisis isn\u2019t going anywhere.\u201d<\/p>\n
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