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Debt Super Committee Could Spoil the Holidays

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- With a rapidly escalating equity market and a 2.5% real GDP growth rate reported for the third quarter of 2011, it's clear sailing ahead for the U.S. economy. Right?

Hold on a minute. If we were to extract two unsustainable factors (the post-Japanese earthquake rebound in auto production and the decline in the household personal savings rate during the third quarter), U.S. real GDP growth in the third quarter was flat. Coming after a 0.4% first quarter and 1.3% second quarter GDP growth rate, the U.S economy is just one exogenous shock away from recession. Not so terrific. Actually, any one of a number of risks could spoil the upcoming holiday season for the U.S. economy:

1. The U.S. consumer remains overleveraged, is working fewer hours, and is earning lower real wages over the past year.

2. The housing market remains severely depressed and actually impedes labor mobility, thereby further worsening an unemployment rate that has been near or above 9% for 31 consecutive months.

3. The European debt crisis and resulting recession will negatively impact U.S. economic growth as well as emerging markets' growth.

4. China's credit-driven rapid economic expansion is slowing, and the Chinese government must now delicately avoid a "hard landing" despite the weakening of its European export markets.

5. Middle East unrest persists and could lead to higher oil prices.

6. The U.S. Joint Super Committee may fail to address the structural issues underpinning the high U.S. debt level, thereby undermining investor confidence in both politicians and the economy.

7. Fiscal policy initiatives to stimulate an economic recovery are hamstrung by a bitterly divided Congress.

8. Monetary policy initiatives to stimulate an economic revival are untested and may lead to severe unintended consequences, thereby potentially limiting the Fed's willingness to implement them.

To be clear, the Federal Reserve is optimistic about forthcoming U.S. economic growth despite the gloomy list of worries above. The Fed expects the change in U.S. real GDP to be 2.5% to 2.9% in 2012; 3% to 3.5% in 2013; and 3% to 3.9% in 2014. Of course, those projections have been meaningfully reduced from the Fed's previous forecasts in July. Moreover, the Fed sees the unemployment rate hovering at 8.5% to 8.7% in 2012; at 7.8% to 8.2% in 2013; and at 6.8% to 7.7% in 2014. Not exactly a robust economic renaissance, and the Fed acknowledged that the risks remain elevated to the downside in their forecasts.

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