May 26, 2013 | 09:56 AM (BD Time)
26 May, 2013 Sunday
US consumers carry purchases on the Third Street Promenade in Santa Monica, Calif.
US economy hanging in balance between recovery, recession
. Xinhua, washington
Flagging growth and high unemployment have prompted a warning that the United States is worse off than previously thought, begging the question whether
the world's largest economy is once again headed toward a cliff.
In an interview on CNBC earlier this week, former U.S. President Bill Clinton said the United States is already undergoing another downturn. He urged Congress to extend all the tax cuts slated to expire by this year's end in order to stave off further damage to the economy.
Clinton's comments came on the heels of the release of a new book by Nobel Prize winning economist Paul Krugman, who argued that the United States is undergoing a mild depression reminiscent of the 1930s.
"We're in a, if you'd like, a low-key version of the Great Depression," he told Bloomberg TV in April upon the release of "End This Depression Now".
"Here in America it's not as bad as the 1930s, though in a lot of Europe it is," said Krugman, who also writes a column for The New York Times.
"It is a persistently depressed economy. It's got the same fundamental character as the Great Depression," he said, arguing that the economic crisis of the 1930s saw sluggish job growth amid two recessions and two recoveries.
The recoveries, however, were never robust enough to make up lost ground during a long period when the economy wiggled up and down but was persistently depressed.
"And that's what we're living through right now," Krugman said.
Indeed, Friday's jobs report underscored a hapless U.S. economy struggling to claw its way out of the hole.
The unemployment rate rose Friday to 8.2 percent from the previous month's 8.1 percent, and the U.S. economy added a paltry 69,000 jobs in May, falling short of the 90,000 to 100,000 jobs economists said are needed each month just to keep pace with growth in the working-age population.
Still, famed investor Warren Buffett, CEO of Berkshire Hathaway, said Tuesday in Washington that another U.S. recession is unlikely, with chances of a near-term recession "very low, unless events in Europe develop in some way that spill over here big time."
Barry Bosworth, senior fellow at the Brookings Institution, told Xinhua that while the United States is not headed toward recession or depression, optimism about faster growth in 2012 is fading and there are "major decisions to be made about budget matters in the United States and Europe over the remainder of this year that could have a very large impact on the economy."
"Certainly, the unemployment rate is far below rates that we would associate with past depressions," he said. "Growth has been disappointingly slow, as in Japan after its financial crisis of 1990."
"Perhaps a more meaningful term would be stagnation as the economy continues to operate well below full employment," he said.
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