COLORADO SPRINGS, Colo.
While the United States remains one of the strongest economies
globally, lackluster growth and a large fiscal deficit may
cause serious downward pressure in the near term, according to
The U.S. market has been
relatively stable compared with other major economies,
according to Martin Feldstein, George F. Baker professor of
economics at Harvard University. But even the United States may
be at risk if certain policy measures are not implemented.
"I believe the U.S. economy is
in better shape than the economies in the eurozone and Asia,"
Feldstein said during the American Iron and Steel
Institutes 121st general meetingcohosted by the
Metals Service Center Institutein Colorado Springs May
16. "But despite its long-term benefits, there are some major
problems affecting our economic climate."
Feldstein, who also is president
emeritus of the National Bureau of Economic Research, said that
the United States is facing a "cyclically weak economy" and
"large fiscal imbalances in both the short run and the long
In particular, the United States
faces the issue of an enduringly tepid economy. While the
recession ended in summer 2009nearly four years
agoreal per-capita gross domestic product (GDP) in the
United States is lower now than it was before the downturn, he
said. Total GDP rose 2.5 percent in 2010, 2 percent in 2011 and
less than 2 percent in 2012a trend that does not point to
a robust economy. "Well be lucky if we get to 2-percent
growth this year. I think theres a risk itll be
less than 1 percent," he added.
In addition to a lackluster
economy, Washington also faces the problems of a fiscal deficit
and political gridlock, along with cuts due to the sequester
and increases in payroll and personal taxes.
Looking internationally, little
seems to be brighter than the U.S. market, Feldstein said.
Europe, which sees unemployment
rates higher than 25 percent in some areas, continues to face
massive debt-to-GDP ratios, with increasing unemployment rates
in debt-ridden nations and little fiscal certainty in
Growth also has slowed in China,
although the outlook there is better due to new leadership and
increased urbanization. However, China faces pressure from
non-bank institutions, including risky "shadow banks" with
large loans, Feldstein said.
But it may not all look
negative. Given the right fiscal approach, the U.S. economy has
advantages, particularly in a strong labor force and access to
affordable natural gas. But the economy likely will remain
anemic in the short run, he said. "Despite what I see as very
good long-term prospects for the United States, I think the
economy this year will be quite weak."