Lucky 2013: A case for economic good timesJanuary 18, 2013: 5:00 AM ET
It's easy to predict gloom and doom for the U.S. economy. But strong growth and job recovery are no pie-in-the-sky fantasies.
By Geoff Colvin, senior editor-at-large
FORTUNE -- In your sleep you can name 10 reasons 2013 will be lousy for business and the economy. So can I. But analyzing only the downside is a bad habit; missing a boom is at least as dangerous as missing a bust. So let's imagine the good-news scenario that absolutely no one is talking about. Is it likely? I dunno. Plausible? Absolutely. Here's what gets us to a 4% growth rate, rising incomes, and low unemployment by year-end:
The revolution in American oil and gas increasingly spreads its benefits through the economy. Our crude-oil production, after declining for the past 20 years, is suddenly rocketing and will keep doing so for the rest of the decade, says the Energy Information Administration's just-released outlook. Natural-gas production will boom for at least the next three decades. A resulting industrial renaissance is already under way. Chemical and plastics makers -- Dow (DOW), Mitsubishi, and others -- are building new plants around the country, a stunning turnaround for an industry that has been shutting U.S. plants for years. The Timken Co. (TKR) is expanding a mill in Ohio to make specialty steels for the oil and gas industry. Railroads are adding cars to haul the rising output of many industries. Best of all, much of the new production will be exported -- shrinking our trade deficit and bringing jobs and GDP growth to the U.S.
The 113th Congress, spooked by the loathing rightly heaped on the 112th, finally acts on its three most important priorities: reforming the tax code by lowering rates and closing loopholes, making Medicare sustainable, and fixing immigration laws to attract and keep the world's best and most ambitious.
President Obama, finished with running for office and envying Bill Clinton's extraordinary stature domestically and globally, decides to go for a statesman legacy rather than a progressive-hero legacy. He gets behind tax reform by emphasizing its fairness; stresses that Medicare isn't being cut but saved; and negotiates a procedure for legalizing illegals as part of immigration reform. Photos of him signing landmark legislation with leaders of both parties behind him build his image as a pragmatic doer rather than a far-left class warrior.
The Affordable Care Act takes effect mostly glitch-free as the administration realizes that major implementation problems could tank the economy. The law is filled with requirements that seem difficult or impossible for employers to meet; for example, employers must offer "affordable" insurance to workers, but affordability is defined as a percentage of an employee's household income, which employers have no way of knowing. The IRS has announced that for now employers can base calculations on employees' W-2 income and needn't offer affordable insurance for workers' dependents. More such lenient interpretations will ease a hellacious process for employers and workers.
The SEC and other regulators finally stop making excuses on Dodd-Frank rulemaking, clearing the fog that sits over financial markets. The administration has missed 60% of the rulemaking deadlines imposed by the law, says the latest tally by the Davis Polk law firm; 65% of the total required rulemakings still haven't been finalized. Reducing that uncertainty will liberate one of America's greatest economic strengths, its capital markets.
The economy builds steam, and hiring picks up. In response, Washington lets hyperextended unemployment benefits revert to normal duration. Those special 99-week benefits, while helpful to many, also distort labor markets by encouraging nonwork, though it's politically incorrect to say so. Getting back to normal frees up another of our greatest strengths, our flexible labor markets.
The virtuous circle that drives all growing economies gains power. Increased economic activity creates confidence, which spurs more activity. Entrepreneurs, managers, and consumers start to believe again.
It could happen, or part of it. No one knows if it will, but we need to be ready for it. And if you think this whole scenario is nonsense, please remember a lesson of history: When everyone believes it can't possibly happen, that's when it happens.
This story is from the February 4, 2013 issue of Fortune.