The Shape of Things to Come
Four leading economists predict the trajectory of the recovery.
Professor at New York University and chairman of Roubini Global Economics
We expect a decade of growth at or below potential. Policy responses to this crisis have been very aggressive and have steered the economy onto a path toward recovery. But we believe it will be a U-shaped recovery rather than a V. Private demand remains weak and income generation sluggish. Some crucial assets (notably housing, which provided collateral during the credit-fueled but wageless recovery that followed 9/11) will likely continue to deflate throughout 2010. Households are saving more and spending less, and that will last for several years.
Even when private demand comes back and the recovery becomes self-sustaining, Americans will have to deal with the releveraging of the government, which has overextended itself. That will require measures to bring deficits back under control--a politically difficult mix of higher taxes and lower public spending. Like it or not, the high cost of servicing the national debt will put a lid on growth for years to come.
Finance professor at the Wharton School at the University of Pennsylvania
I do not go along with the consensus that the U.S. faces a long period of stagnation in the coming years. In fact, I believe that over the next decade the U.S. economy can grow faster than the 3.2 percent average rate it has achieved over the past half century. That is because in the long run, economic growth is based on advances in productivity, and productivity is based on discovery and innovation. With the communications revolution, there has been an explosion in the number of researchers and entrepreneurs from around the world who are tackling difficult problems in energy, conservation, and medicine, and will make technological breakthroughs that will enhance our standard of living.
Professor at the Haas School of Business at the University of California, Berkeley
There is a wide range of economic-growth forecasts over the next five years, reflecting the fact that the Great Recession of 2008-09 was broad and deep, and that the loss of wealth was substantial. …