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发帖数: 8227 | 1 The Near- and Longer-Term Prospects for the U.S. Economy
Good morning. As always, thanks are due to the Federal Reserve Bank of
Kansas City for organizing this conference. This year's topic, long-term
economic growth, is indeed pertinent--as has so often been the case at this
symposium in past years. In particular, the financial crisis and the
subsequent slow recovery have caused some to question whether the United
States, notwithstanding its long-term record of vigorous economic growth,
might not now be facing a prolonged period of stagnation, regardless of its
public policy choices. Might not the very slow pace of economic expansion of
the past few years, not only in the United States but also in a number of
other advanced economies, morph into something far more long-lasting?
I can certainly appreciate these concerns and am fully aware of the
challenges that we face in restoring economic and financial conditions
conducive to healthy growth, some of which I will comment on today. With
respect to longer-run prospects, however, my own view is more optimistic. As
I will discuss, although important problems certainly exist, the growth
fundamentals of the United States do not appear to have been permanently
altered by the shocks of the past four years. It may take some time, but we
can reasonably expect to see a return to growth rates and employment levels
consistent with those underlying fundamentals. In the interim, however, the
challenges for U.S. economic policymakers are twofold: first, to help our
economy further recover from the crisis and the ensuing recession, and
second, to do so in a way that will allow the economy to realize its longer-
term growth potential. Economic policies should be evaluated in light of
both of those objectives.
This morning I will offer some thoughts on why the pace of recovery in the
United States has, for the most part, proved disappointing thus far, and I
will discuss the Federal Reserve's policy response. I will then turn briefly
to the longer-term prospects of our economy and the need for our country's
economic policies to be effective from both a shorter-term and longer-term
perspective.
Near-Term Prospects for the Economy and Policy
In discussing the prospects for the economy and for policy in the near term,
it bears recalling briefly how we got here. The financial crisis that
gripped global markets in 2008 and 2009 was more severe than any since the
Great Depression. Economic policymakers around the world saw the mounting
risks of a global financial meltdown in the fall of 2008 and understood the
extraordinarily dire economic consequences that such an event could have. As
I have described in previous remarks at this forum, governments and central
banks worked forcefully and in close coordination to avert the looming
collapse. The actions to stabilize the financial system were accompanied,
both in the United States and abroad, by substantial monetary and fiscal
stimulus. But notwithstanding these strong and concerted efforts, severe
damage to the global economy could not be avoided. The freezing of credit,
the sharp drops in asset prices, dysfunction in financial markets, and the
resulting blows to confidence sent global production and trade into free
fall in late 2008 and early 2009.
We meet here today almost exactly three years since the beginning of the
most intense phase of the financial crisis and a bit more than two years
since the National Bureau of Economic Research's date for the start of the
economic recovery. Where do we stand?
There have been some positive developments over the past few years,
particularly when considered in the light of economic prospects as viewed at
the depth of the crisis. Overall, the global economy has seen significant
growth, led by the emerging-market economies. In the United States, a
cyclical recovery, though a modest one by historical standards, is in its
ninth quarter. In the financial sphere, the U.S. banking system is generally
much healthier now, with banks holding substantially more capital. Credit
availability from banks has improved, though it remains tight in categories-
-such as small business lending--in which the balance sheets of potential
borrowers remain impaired. Companies with access to the public bond markets
have had no difficulty obtaining credit on favorable terms. Importantly,
structural reform is moving forward in the financial sector, with ambitious
domestic and international efforts underway to enhance the capital and
liquidity of banks, especially the most systemically important banks; to
improve risk management and transparency; to strengthen market
infrastructure; and to introduce a more systemic, or macroprudential,
approach to financial regulation and supervision.
In the broader economy, manufacturing production in the United States has
risen nearly 15 percent since its trough, driven substantially by growth in
exports. Indeed, the U.S. trade deficit has been notably lower recently than
it was before the crisis, reflecting in part the improved competitiveness
of U.S. goods and services. Business investment in equipment and software
has continued to expand, and productivity gains in some industries have been
impressive, though new data have reduced estimates of overall productivity
improvement in recent years. Households also have made some progress in
repairing their balance sheets--saving more, borrowing less, and reducing
their burdens of interest payments and debt. Commodity prices have come off
their highs, which will reduce the cost pressures facing businesses and help
increase household purchasing power.
Notwithstanding these more positive developments, however, it is clear that
the recovery from the crisis has been much less robust than we had hoped.
From the latest comprehensive revisions to the national accounts as well as
the most recent estimates of growth in the first half of this year, we have
learned that the recession was even deeper and the recovery even weaker than
we had thought; indeed, aggregate output in the United States still has not
returned to the level that it attained before the crisis. Importantly,
economic growth has for the most part been at rates insufficient to achieve
sustained reductions in unemployment, which has recently been fluctuating a
bit above 9 percent. Temporary factors, including the effects of the run-up
in commodity prices on consumer and business budgets and the effect of the
Japanese disaster on global supply chains and production, were part of the
reason for the weak performance of the economy in the first half of 2011;
accordingly, growth in the second half looks likely to improve as their
influence recedes. However, the incoming data suggest that other, more
persistent factors also have been at work.
Why has the recovery from the crisis been so slow and erratic? Historically,
recessions have typically sowed the seeds of their own recoveries as
reduced spending on investment, housing, and consumer durables generates
pent-up demand. As the business cycle bottoms out and confidence returns,
this pent-up demand, often augmented by the effects of stimulative monetary
and fiscal policies, is met through increased production and hiring.
Increased production in turn boosts business revenues and household incomes
and provides further impetus to business and household spending. Improving
income prospects and balance sheets also make households and businesses more
creditworthy, and financial institutions become more willing to lend.
Normally, these developments create a virtuous circle of rising incomes and
profits, more supportive financial and credit conditions, and lower
uncertainty, allowing the process of recovery to develop momentum.
These restorative forces are at work today, and they will continue to
promote recovery over time. Unfortunately, the recession, besides being
extraordinarily severe as well as global in scope, was also unusual in being
associated with both a very deep slump in the housing market and a historic
financial crisis. These two features of the downturn, individually and in
combination, have acted to slow the natural recovery process.
Notably, the housing sector has been a significant driver of recovery from
most recessions in the United States since World War II, but this time--with
an overhang of distressed and foreclosed properties, tight credit
conditions for builders and potential homebuyers, and ongoing concerns by
both potential borrowers and lenders about continued house price declines--
the rate of new home construction has remained at less than one-third of its
pre-crisis level. The low level of construction has implications not only
for builders but for providers of a wide range of goods and services related
to housing and homebuilding. Moreover, even as tight credit for some
borrowers has been one of the factors restraining housing recovery, the
weakness of the housing sector has in turn had adverse effects on financial
markets and on the flow of credit. For example, the sharp declines in house
prices in some areas have left many homeowners "underwater" on their
mortgages, creating financial hardship for households and, through their
effects on rates of mortgage delinquency and default, stress for financial
institutions as well. Financial pressures on financial institutions and
households have contributed, in turn, to greater caution in the extension of
credit and to slower growth in consumer spending.
I have already noted the central role of the financial crisis of 2008 and
2009 in sparking the recession. As I also noted, a great deal has been done
and is being done to address the causes and effects of the crisis, including
a substantial program of financial reform, and conditions in the U.S.
banking system and financial markets have improved significantly overall.
Nevertheless, financial stress has been and continues to be a significant
drag on the recovery, both here and abroad. Bouts of sharp volatility and
risk aversion in markets have recently re-emerged in reaction to concerns
about both European sovereign debts and developments related to the U.S.
fiscal situation, including the recent downgrade of the U.S. long-term
credit rating by one of the major rating agencies and the controversy
concerning the raising of the U.S. federal debt ceiling. It is difficult to
judge by how much these developments have affected economic activity thus
far, but there seems little doubt that they have hurt household and business
confidence and that they pose ongoing risks to growth. The Federal Reserve
continues to monitor developments in financial markets and institutions
closely and is in frequent contact with policymakers in Europe and elsewhere.
Monetary policy must be responsive to changes in the economy and, in
particular, to the outlook for growth and inflation. As I mentioned earlier,
the recent data have indicated that economic growth during the first half
of this year was considerably slower than the Federal Open Market Committee
had been expecting, and that temporary factors can account for only a
portion of the economic weakness that we have observed. Consequently,
although we expect a moderate recovery to continue and indeed to strengthen
over time, the Committee has marked down its outlook for the likely pace of
growth over coming quarters. With commodity prices and other import prices
moderating and with longer-term inflation expectations remaining stable, we
expect inflation to settle, over coming quarters, at levels at or below the
rate of 2 percent, or a bit less, that most Committee participants view as
being consistent with our dual mandate.
In light of its current outlook, the Committee recently decided to provide
more specific forward guidance about its expectations for the future path of
the federal funds rate. In particular, in the statement following our
meeting earlier this month, we indicated that economic conditions--including
low rates of resource utilization and a subdued outlook for inflation over
the medium run--are likely to warrant exceptionally low levels for the
federal funds rate at least through mid-2013. That is, in what the Committee
judges to be the most likely scenarios for resource utilization and
inflation in the medium term, the target for the federal funds rate would be
held at its current low levels for at least two more years.
In addition to refining our forward guidance, the Federal Reserve has a
range of tools that could be used to provide additional monetary stimulus.
We discussed the relative merits and costs of such tools at our August
meeting. We will continue to consider those and other pertinent issues,
including of course economic and financial developments, at our meeting in
September, which has been scheduled for two days (the 20th and the 21st)
instead of one to allow a fuller discussion. The Committee will continue to
assess the economic outlook in light of incoming information and is prepared
to employ its tools as appropriate to promote a stronger economic recovery
in a context of price stability.
Economic Policy and Longer-Term Growth in the United States
The financial crisis and its aftermath have posed severe challenges around
the globe, particularly in the advanced industrial economies. Thus far I
have reviewed some of those challenges, offered some diagnoses for the slow
economic recovery in the United States, and briefly discussed the policy
response by the Federal Reserve. However, this conference is focused on
longer-run economic growth, and appropriately so, given the fundamental
importance of long-term growth rates in the determination of living
standards. In that spirit, let me turn now to a brief discussion of the
longer-run prospects for the U.S. economy and the role of economic policy in
shaping those prospects.
Notwithstanding the severe difficulties we currently face, I do not expect
the long-run growth potential of the U.S. economy to be materially affected
by the crisis and the recession if--and I stress if--our country takes the
necessary steps to secure that outcome. Over the medium term, housing
activity will stabilize and begin to grow again, if for no other reason than
that ongoing population growth and household formation will ultimately
demand it. Good, proactive housing policies could help speed that process.
Financial markets and institutions have already made considerable progress
toward normalization, and I anticipate that the financial sector will
continue to adapt to ongoing reforms while still performing its vital
intermediation functions. Households will continue to strengthen their
balance sheets, a process that will be sped up considerably if the recovery
accelerates but that will move forward in any case. Businesses will continue
to invest in new capital, adopt new technologies, and build on the
productivity gains of the past several years. I have confidence that our
European colleagues fully appreciate what is at stake in the difficult
issues they are now confronting and that, over time, they will take all
necessary and appropriate steps to address those issues effectively and
comprehensively.
This economic healing will take a while, and there may be setbacks along the
way. Moreover, we will need to remain alert to risks to the recovery,
including financial risks. However, with one possible exception on which I
will elaborate in a moment, the healing process should not leave major scars
. Notwithstanding the trauma of the crisis and the recession, the U.S.
economy remains the largest in the world, with a highly diverse mix of
industries and a degree of international competitiveness that, if anything,
has improved in recent years. Our economy retains its traditional advantages
of a strong market orientation, a robust entrepreneurial culture, and
flexible capital and labor markets. And our country remains a technological
leader, with many of the world's leading research universities and the
highest spending on research and development of any nation.
Of course, the United States faces many growth challenges. Our population is
aging, like those of many other advanced economies, and our society will
have to adapt over time to an older workforce. Our K-12 educational system,
despite considerable strengths, poorly serves a substantial portion of our
population. The costs of health care in the United States are the highest in
the world, without fully commensurate results in terms of health outcomes.
But all of these long-term issues were well known before the crisis; efforts
to address these problems have been ongoing, and these efforts will
continue and, I hope, intensify.
The quality of economic policymaking in the United States will heavily
influence the nation's longer-term prospects. To allow the economy to grow
at its full potential, policymakers must work to promote macroeconomic and
financial stability; adopt effective tax, trade, and regulatory policies;
foster the development of a skilled workforce; encourage productive
investment, both private and public; and provide appropriate support for
research and development and for the adoption of new technologies.
The Federal Reserve has a role in promoting the longer-term performance of
the economy. Most importantly, monetary policy that ensures that inflation
remains low and stable over time contributes to long-run macroeconomic and
financial stability. Low and stable inflation improves the functioning of
markets, making them more effective at allocating resources; and it allows
households and businesses to plan for the future without having to be unduly
concerned with unpredictable movements in the general level of prices. The
Federal Reserve also fosters macroeconomic and financial stability in its
role as a financial regulator, a monitor of overall financial stability, and
a liquidity provider of last resort.
Normally, monetary or fiscal policies aimed primarily at promoting a faster
pace of economic recovery in the near term would not be expected to
significantly affect the longer-term performance of the economy. However,
current circumstances may be an exception to that standard view--the
exception to which I alluded earlier. Our economy is suffering today from an
extraordinarily high level of long-term unemployment, with nearly half of
the unemployed having been out of work for more than six months. Under these
unusual circumstances, policies that promote a stronger recovery in the
near term may serve longer-term objectives as well. In the short term,
putting people back to work reduces the hardships inflicted by difficult
economic times and helps ensure that our economy is producing at its full
potential rather than leaving productive resources fallow. In the longer
term, minimizing the duration of unemployment supports a healthy economy by
avoiding some of the erosion of skills and loss of attachment to the labor
force that is often associated with long-term unemployment.
Notwithstanding this observation, which adds urgency to the need to achieve
a cyclical recovery in employment, most of the economic policies that
support robust economic growth in the long run are outside the province of
the central bank. We have heard a great deal lately about federal fiscal
policy in the United States, so I will close with some thoughts on that
topic, focusing on the role of fiscal policy in promoting stability and
growth.
To achieve economic and financial stability, U.S. fiscal policy must be
placed on a sustainable path that ensures that debt relative to national
income is at least stable or, preferably, declining over time. As I have
emphasized on previous occasions, without significant policy changes, the
finances of the federal government will inevitably spiral out of control,
risking severe economic and financial damage.1 The increasing fiscal burden
that will be associated with the aging of the population and the ongoing
rise in the costs of health care make prompt and decisive action in this
area all the more critical.
Although the issue of fiscal sustainability must urgently be addressed,
fiscal policymakers should not, as a consequence, disregard the fragility of
the current economic recovery. Fortunately, the two goals of achieving
fiscal sustainability--which is the result of responsible policies set in
place for the longer term--and avoiding the creation of fiscal headwinds for
the current recovery are not incompatible. Acting now to put in place a
credible plan for reducing future deficits over the longer term, while being
attentive to the implications of fiscal choices for the recovery in the
near term, can help serve both objectives.
Fiscal policymakers can also promote stronger economic performance through
the design of tax policies and spending programs. To the fullest extent
possible, our nation's tax and spending policies should increase incentives
to work and to save, encourage investments in the skills of our workforce,
stimulate private capital formation, promote research and development, and
provide necessary public infrastructure. We cannot expect our economy to
grow its way out of our fiscal imbalances, but a more productive economy
will ease the tradeoffs that we face.
Finally, and perhaps most challenging, the country would be well served by a
better process for making fiscal decisions. The negotiations that took
place over the summer disrupted financial markets and probably the economy
as well, and similar events in the future could, over time, seriously
jeopardize the willingness of investors around the world to hold U.S.
financial assets or to make direct investments in job-creating U.S.
businesses. Although details would have to be negotiated, fiscal
policymakers could consider developing a more effective process that sets
clear and transparent budget goals, together with budget mechanisms to
establish the credibility of those goals. Of course, formal budget goals and
mechanisms do not replace the need for fiscal policymakers to make the
difficult choices that are needed to put the country's fiscal house in order
, which means that public understanding of and support for the goals of
fiscal policy are crucial.
Economic policymakers face a range of difficult decisions, relating to both
the short-run and long-run challenges we face. I have no doubt, however,
that those challenges can be met, and that the fundamental strengths of our
economy will ultimately reassert themselves. The Federal Reserve will
certainly do all that it can to help restore high rates of growth and
employment in a context of price stability. |
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