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The Monitor's View

How to boost confidence in the American economy

America needs to boost its confidence in the economy in order to fend off a stalled recovery or a double dip back into recession. It can do this by balancing gloomy news with encouraging signs, and seizing opportunities where others might see only risks.

By the Monitor's Editorial Board / July 8, 2010



Did you happen to catch the Timothy Geithner interview on the PBS NewsHour this week? The United States Treasury secretary must have used the word “confidence” a dozen times.

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And no wonder. Boosting the confidence of Americans in the US economy right now is critical to fend off a stalled recovery or even a double dip into another recession.

Consumer confidence is wilting under scorching headlines about slow job growth, debt jitters, and a lackluster stock market. After rising for three months, consumer confidence fell sharply in June.

Businesses are wary, too. They don’t like new health-care and financial requirements. They’re not sure what’s going to happen to energy legislation and energy costs. They wonder what tax increases and/or spending cuts might lie ahead. Meanwhile, Washington has suddenly put a brake on more stimulus.

The country’s spirits need lifting. But how do you do that?

One way is for Americans to balance bad news with encouraging signs. For instance, the International Monetary Fund (IMF) now forecasts that the world economy will grow faster than expected. This week it raised its 2010 global growth estimate to 4.6 percent. Emerging markets – China, India, Latin America, and even Africa – look strong.

Notice, too, that world financial markets have stopped hyperventilating over the Greek debt crisis. That’s because European countries are taking action to (a) strengthen their currency, and (b) reduce deficits and debt.

And let’s step back from the day-to-day headlines for a minute: The US economy has been growing for a year now (the IMF forecasts a 2010 growth rate of 3.35 percent). Jobs have increased for six months. Incomes are rising. And housing prices have been more or less stable for a long time.

One of the problems with confidence-building is “the waiting game.” Consumers wait for better job numbers before spending; businesses wait for more consumer spending before hiring.

But it’s quite possible to break the habit of waiting for someone else to act. If businesses are discouraged by weak consumer spending by Americans, they can reorient themselves to export markets – and create US jobs in the process. President Obama could help here by aggressively pushing Congress to pass free-trade deals with South Korea, Colombia, and Panama.

If companies are discouraged by mismatched skills of workers, they can invest more of their profits in job training and community colleges (businesses are sitting on about $1.8 trillion in cash as they wait for consumers to spend more).

Americans, meanwhile, can do their own reorienting by moving to areas with better job prospects and by learning new skills. They can also look again at the skills they do have and sell them more creatively – on the Internet, for instance, or on a contract or freelance basis.

And even while “government” waits for this year’s elections, politicians at the state and federal level can do what the country longs for: pledge to work across party lines to tackle long-term debt that is fueled by health-care and retirement costs.

It may look to many like a scary and risky time for the country. But it’s actually full of opportunity. Mortgage rates are at a historic low, perfect for refinancing and improving a household’s cash flow, or for buying a first home.

The stock market got you down? Remember that automatic 401k deductions are purchasing more shares at these lower prices – and investors looking to buy companies will find them more affordable.

Economic value originates in ideas, and America has no shortage of those. Now is the time to act on them.

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