Confusing signposts on road to recovery

Want to know what’s wrong with the U.S. economy? You only need to read what the experts have to say.

Of course, expert analysis is all over the place. And American confidence in those experts seems to have justifiably diminished, along with the economic output.

✔ The federal stimulus package was too small to have a real effect on our massive economy, say the Keynesians. Roll out more trillions in federal spending programs and we’ll begin to see an impact on unemployment and a real economic recovery.

✔ Nonsense, say the supply-siders. Federal spending is ineffective at creating jobs, which is why the 2009 stimulus did so little. Another stimulus would only delay recovery. Far more important is continuing the 2003 Bush tax cuts, they say, because an increase now in the capital gains tax and income taxes for high earners would depress investment and the job creation that comes with it.

✔ Extending unemployment benefits was necessary so that those who can’t find work in this economy at least have money for basic necessities and don’t become a worse drag on the economy, many have argued.

✔ Extending unemployment benefits only extends joblessness by encouraging people not to look for work, others say. Harvard economic professor Robert Barro, in a Monday piece in The Wall Street Journal, even estimated that the current unemployment rate would be 6.8 percent instead of 9.5 percent if Congress hadn’t extended unemployment benefits to 99 weeks.

✔ We’re in the beginning of a slow-but-steady recovery.

✔ We’re stumbling toward a double-dip recession.

Is it any wonder Americans are confused and cautious. And that leads to another theory, posited by Morgan Stanley economist Richard Berner and referred to by economist and columnist Robert Samuelson: The economic recovery is lagging because Americans are doing just what experts have long said they should do — saving more of their incomes and paying down more of their debt. In fact, the personal savings rate is up from 2 percent in 2007 to 6 percent today, they note. That’s still below the 10 percent savings rate of the early 1980s, but a solid rate, nonetheless.

But even these two experts can’t agree on what this means for the immediate future.

Berner sees consumer spending ready to take off — not explode, but grow steadily. That will increase consumption, boost manufacturing and retail sectors and grow jobs.

But Samuelson suggests it’s possible consumers will continue retrenching — saving more and paying down debt — for several years because there is so much uncertainty about the economic future.

Consumers have come to understand that the experts aren’t so expert regarding the economy. Black swans — entirely unforeseen events — that control and continue to confound experts of all political stripes.

Even so, we hope consumers — and corporations, as well — will begin to loosen their purse strings in coming months, without reverting to the careless, borrow-and-spend practices that provoked the current crisis.


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