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US Economy to Grow 2-3% in 2012, Says Treasury Secretary Geithner

  • Written by Adrian Monck
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US Secretary of the Treasury Timothy Geithner agrees with the consensus forecast that the United States economy will grow between 2% and 3% this year. “I think that’s a realistic outcome as long as we don’t see a lot of risks coming out of Europe,” he told participants at the World Economic Forum Annual Meeting today in Davos, Switzerland.

“But we still face tremendous challenges,” Geithner conceded. America’s economic prospects are “still very dependent on how the world unfolds.”

“We’re still repairing the damage caused by the devastating financial crisis,” he said. “Unemployment is still very high, housing and construction are still very weak, people still have too much debt.”

Geithner admitted that there are now “very high levels of poverty in this country, very high levels of inequality and an erosion in people’s confidence in their [upward] mobility,” a startling admission for the world’s only remaining superpower.

But he denied that the tough regulations the US is imposing on the financial sector and the reforms in healthcare are holding back economic growth. “The reality does not justify that sense,” he insisted. “Profitability across the American economy is very high, higher than the pre-crisis peak.”

“If you look at investments as a measure of confidence, private investment in equipment and software is up more than 30% since the trough in the first half of 2009,” Geithner added. “Exports are up by 23%. There’s a broad-based strength in energy, in agriculture, in manufacturing.”

“I really do not think we could realistically deliver a better outcome for the American business sector,” he said. “Although we recognize that these reforms are tough and they will change the economics of business, we think the overall effect on the economy is certainly positive long term. There is no basis or evidence that the effects of these reforms are hurting growth now.”

The Great Transformation: Shaping New Models

With record participation of over 2,600 leaders from government, academia, business and civil society, this year’s Annual Meeting also Calls for More Women Leaders.

Thailand’s Prime Minister, Yingluck Shinawatra, opened the discussion by announcing that Thailand plans to create a national women’s development fund to counter human rights abuses directed at women. She said that education is the most effective way of decreasing early pregnancies, the death of women in childbirth and infections of HIV/AIDS. In announcing the fund, Shinawatra further stressed that education is essential in equipping women to resist sexual aggression and to defend their rights.

She added that Thailand plans to host the World Economic Forum on East Asia later this year and the role of women will be one of the major topics discussed.

Sheryl Sandberg, Chief Operating Officer of Facebook, said that women suffer from an ambition gap. “We say we want to educate girls,” she said, “but we don’t really believe it. We don’t raise our daughters to be as ambitious as boys.” Sandberg added that as early as the age of four, boys are taught to be leaders, while girls are encouraged to stay in the background. A man who demands a higher salary is taken more seriously, while a woman who demands the same thing or tries to be assertive is seen as being bossy. “How many boys have you ever heard accused of being too bossy?” Sandberg asked.

During the session, Archbishop Desmond Tutu said that the empowerment of women is essential to development. “Without women we will miss six of the eight Millennium Development Goals,” he said. Asked what would happen if women ruled the world instead of men, Tutu responded, “Men have tried to rule the world for centuries, and they have made a mess. Let’s let the other half try.”

Other important remarks

Private Sector Investment Critical to Bring Power to Millions Living in Energy Poverty
Reducing energy poverty will require the “massive mobilization of all partners” to bring life after dark to millions of people around the world. Speaking at a plenary session, Ban Ki-moon, Secretary-General of the United Nations, called on the private sector to invest in sustainable energy projects and infrastructure, and for governments to make sustainable energy a priority by implementing the right policies.

European Finance Chiefs Hail Fiscal Compact and Call for Growth and Jobs Focus
In a session on the future of the Eurozone, European finance and economics ministers hailed the imminent agreement on closer fiscal convergence in Europe as a major step to restore confidence in their distressed economies. “We need a fiscal compact and we are revamping the economic structure of Europe,” said European Economic and Monetary Affairs Commissioner Olli Rehn. “Prevention is the name of the game and we want to prevent fiscal crisis and external imbalances that have happened in the past year with tremendous human cost.” Added Luis de Guindos Jurado, Minister of Economic Affairs and Competitiveness of Spain.

Adrian Monck. Managing Director, Head of Communications. World Economic Forum