Body
Why Is This Recovery So Slow?
There are four major forces preventing a rapid return of the US economy to its full potential: (1) Households have increased their rate of saving to make up for losses in the value of their houses and to prepare for retirement; (2) banks continue to apply tighter-than-normal standards and terms on loans to households and businesses; (3) foreign governments continue to send record levels of capital into US markets in order to prevent their currencies from appreciating and thus perpetuating a large US trade deficit; and (4) state and local governments, constrained by balanced budget rules, cut spending and raised taxes during and immediately after the recession. Although the last of these forces appears to have run its course, tax increases and spending cuts at the federal level are now taking over as a major factor retarding growth this year.
Commentary Type