Savings are negative, trade deficits at record levels, housing in the tank, consumers are up to their eyeballs in debt and business investment has been lackluster. It all seems to be the perfect storm for a deep and enduring recession. In the past two expansions, the economy faced similar points of truth at mid-decade. In each case the economy got a second wind that allowed growth to continue.
In the 1980s, the economy slowed mid-decade but oil prices were low and the combination of the Reagan defense build up and the savings and loan real estate bubble brought the economy back for several more years of growth.
In the 1990s, the economy slowed mid-decade but oil prices were low and business spending on Y2K and the Internet bubble brought the economy back for several more years of growth.
Enter globalization
What is different this time is the expanded role of globalization. While populists and the occasional cable newscaster will lambaste trade, outsourcing and globalization as a plague on the middle class, nothing could be further from the truth. Over the past 30 years, free trade has done more to lift the fortunes of the country as a whole and the middle class in particular than any government program or any new technology.
See full Press Release.
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