The U.S. economy is this decade likely to perform as poorly as the one that just ended due to higher savings by more cautious Americans and a less qualified labor force, several top economists said Sunday.
The world’s largest economy is expected to see between 2009 and 2019 growth in gross domestic product – a broad measure of economic activity – close to the annual average of 1.9% seen between 1999 and 2009, economists said. That marked the worst performance since the 1930s, the decade of the U.S. Great Depression.
The economic recovery seen from the second half of 2009 has been driven by a government stimulus that will be fading in 2010, warned Martin Feldstein, a Harvard University economist and former Reagan administration economist.
“It’s easy to be dismal about the U.S. economy,” said Dale Jorgenson, an expert on productivity who sees a deterioration in the quality of the labor force causing productivity growth to fall to 1.5% a year this decade from 2% a year in the last 10 years.
Following a financial crisis that was partly a result of Americans spending beyond their means, Nobel-laureate economist Joseph Stiglitz said the U.S. savings rate could go markedly higher in the coming years.
“We’re not likely to have robust growth any time soon,” Stiglitz told a panel at the annual meeting of the American Economic Association entitled “Growth or Stagnation After The Recession.”
Both Stiglitz and Kenneth Rogoff, a Harvard University economist, warned the large debt accumulated to counter the crisis will be a major headache for the U.S. economy. They also cautioned there could be a new crisis down the road unless the U.S. regulatory system is improved.
On a more optimistic note, economists said China and India should continue to propel the world economy forward, which in turn would help the U.S.
Feldstein said there could be a substantial improvement in net exports out of the U.S. “That’s where we could see a shift in aggregate demand, which could bring us back to full employment.”
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