NABE Panel: Majority Sees Current Monetary Policy as Appropriate, Is Split on Fiscal Policy

The NABE Economic Policy Survey presents the consensus of a panel of 242 members of the National Association for Business Economics. Conducted semiannually, this survey was taken July 30-August 10, 2010. May be reprinted in whole or in part with credit given to NABE. View the survey results, including complete tabulations, online at www.nabe.com. This is one of three surveys conducted by NABE. The other two are the NABE Outlook and the NABE Industry Survey. Douglas Duncan, Fannie Mae; Michael Fratantoni, Mortgage Bankers Association; Richard Koss, Fannie Mae; Chad Moutray, U.S. Small Business Administration; and Emily Sanchez, American Chemistry Council, conducted the analysis for this report.

The August 2010 National Association for Business Economics (NABE) Policy Survey reveals that nearly sixty percent of respondents feel that monetary policy posture is appropriate at the present time* and that the greater risks facing the U.S. economy are deflation in the near term and inflation in the longer term.

“The majority of the economists surveyed consider monetary policy to be currently appropriate, with greater disagreement over how the Federal Reserve should proceed over the next 12 months,” according to NABE President Lynn Reaser, who is also chief economist for Point Loma Nazarene University. “Regarding fiscal policy, the economists generally believe the near-term focus should be the promotion of economic growth rather than deficit reduction. The majority of the respondents also do not believe another stimulus package is necessary but think the various tax cuts should be extended beyond their scheduled expiration at year-end.”

Thirty-nine percent of NABE Policy Survey panelists feel that the current posture of fiscal policy is appropriate, down from 44 percent in March. Three quarters of respondents oppose another stimulus package but rank promoting economic growth a higher priority than deficit reduction. Respondents support governmental action related to employment growth but rate clarity on future tax and regulatory policy as the top factor that would advantage employment.

About 60 percent of NABE members responding to the August survey agree that the federal assistance funds allocated to states through the American Reinvestment and Recovery Act (ARRA) were appropriate given the larger economic challenges at the time of the legislation’s enactment; however, a similar share of panelists do not recommend that the federal government continue to “bail out” the states, even after the ARRA funds run out.

Survey respondents expect that the next year will be difficult for the “Club Med” countries, with most expecting that one or more of these countries will either be forced to restructure their debt or call on an outside funding source. Despite this expectation, about 80 percent of respondents expect that the Eurozone will remain fully intact.

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