James Ahiakpor, Professor at California State University, East Bay on the U.S. economy and its prosp

I would describe the current economic situation of the US as that of limping along. The jobless claims may have fallen, but the labor force participation rate has fallen also, to about 64% (63.6% in September 2012) as compared with 66% for 2008.  The number of potential workers who have left the labor force has increased since the beginning of the recession.  Thus, the number of people not in the labor force rose from 79.5 million at the end of 2008 to 88.7 million in September.  The real GDP growth rate was 1.3 percent in the second quarter of 2012, down from 2 percent in the first quarter.  The numbers, to me, just do not indicate a clear emergence from "the woods" as yet. 

It is hard to tell.  The Democrats would like to have the top-income bracket lose their tax cuts (under Bush) while the lower-income tax payers retain theirs.  The Republicans want to have all tax payers retain their current (lower) tax rates.  They argue that raising taxes on the high-income earners is a disincentive for their continued investment, necessary for promoting economic growth.  Besides, they also argue, the budget deficits will not be closed through such a tax increase, while economic recovery along with the current tax rates would work more to raise revenues and close the budget gap.  They expect that cutting government spending and reducing the inefficiency drag on the economy associated with most government expenditures would work better to resolve the country's economic problems than doing more of the increased government spending that has been the fashion since 2009.  Perhaps, the election results in November will force the requisite "compromise." 

Again, this all depends upon who wins the presidential election and the composition of the Congress.  We may see more of the same actions as of now if President Obama wins re-election, and the economy may continue to limp along.  Different policies aimed at encouraging the private sector to become more assured about the profitability of their investments and hiring more workers are likely to be implemented if the Republicans take control. I would also expect a Republican regime to lean on the Federal Reserve to end its massive infusion of money (newly printed money, not the public's savings) through the Quantitative Easing program (QE 3 right now) that has failed to stimulate the economy as expected, but only has imposed a heavy tax on savers through the negative real interest rates they earn on their savings deposits. In fall 2008, for example, one could earn as much as 4.45% on a 9-month certificate of deposit, but the rate has gone down to about 0.30% for a similar term deposit, while the inflation rate is about 3 percent. The Federal Reserve apparently has yet to learn that it is not the quantity of paper money in an economy that determines the economy's growth but real savings, and we are not in the same situation as in the early 1930s (without the FDIC) when loss of confidence in the banking system led to the public rushing to redeem their savings in cash ($8 billion between 1930 and 1933, causing the price level to actually fall). 

As indicated above, it depends very much upon who wins the presidential election and the composition of Congress.