Wanted: next growth engine for US economy
High-tech, healthcare, energy, or factory goods could rev up a year from now.
With the US economy now in outright contraction, it's clear that steering a course through the credit crisis will set the stage for another big job after that: reviving growth.Skip to next paragraph
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One after another in the past decade, important economic engines have sputtered and then stalled: an Internet boom, homes and mortgages, commodities. Long-invincible US consumers are now retrenching in the face of debt burdens and a weak job market.
Where will new growth come from, and when?
The possibilities include technology, healthcare, energy, and manufactured goods – possibly all of the above. But don't hold your breath for the word "boom" to be attached to any sector. It may take a year or more for a new job engine to get started.
In fact, after one big stimulus package offered only passing relief to the economy this year, the next government effort to restore growth should target specific industries with long-term potential, not just put money into the hands of consumers, some economists say.
"That would be a huge change" from traditional recession-fighting efforts, says Robert Atkinson, president of the Information Technology and Innovation Foundation in Washington. But "this is a unique time in our history where we have a short-term crisis and a long-term crisis."
The immediate problem is a recession, but the recovery may hinge on how the economy copes with long-run problems that range from the cost of healthcare to global competition in knowledge-based industries.
"We can no longer afford a 'consumption-based' stimulus package that leaves the nation with little to show after consumers spend the money," Mr. Atkinson's group argues in a new report.
Whereas the mid-year stimulus package of 2008 focused on tax-rebate checks for millions of consumers, he proposes a range of spending plans that have both immediate and longer-term benefits.
Targets for federal spending or tax credits would include:
•Universities that build new research infrastructure.
•Consumers and businesses that buy energy-efficient equipment.
•Healthcare providers that deploy information technology to cut costs.
•Computers and Internet access for low-income families.
•Businesses investing in information technology.
Such measures would give a quick boost to the gross domestic product, but also lay the groundwork for larger goals, such as an economy less burdened by energy and healthcare costs.
Even after the milder US recession of 2001, it took time for the technology sector to hand the baton to a new engine of growth – which turned out to be home construction and mortgage finance.
This time, the economic problems run deeper. Many forecasters say additional government stimulus is needed in some form – as well as ongoing steps to repair the damaged financial sector.
Gary Shilling, an economist who owns a forecasting firm in Springfield, N.J., warns that working through a glut of homes for sale, and new help for homeowners hit by falling home values, is just the start. The recession will also hit banks with losses from credit-card debts, commercial real estate loans, and junk bonds, he predicts.