Alleluia!  It looks like the Federal Reserve policy makers and most  of America’s leading economists are finally coming  to the same conclusion about the future of the U.S. economy.   They aren’t saying that we are headed for a “double-dip” recession, or that somehow the economy will plunge into another “Great Depression”;  and they are not warning us about an impending crash in the stock market, or an end to American life as we know it.  What they are saying is that the U.S. is headed for an extended period (perhaps ten years or more) of very slow economic growth.  Much like Japan in the decade of the 1990′s, the U.S. may suffer through a period  that will feel to many people like a never-ending recession, where the economy does not grow fast enough to recoup jobs, and investments in  stocks and homes will continue to lose value.  The sad truth is that an anemic growth rate of 1% , or even less, is not out of the question.  The robust economic growth experienced in the past was built upon unsustainable deficit spending,  by the government and by households across the country, and the next ten years or so will be spent “paying the piper”.

As the smoke from the frightening economic meltdown of 2007/2008 continues to clear, there will emerge a new “economic landscape” over the horizon for America.  The landscape will be characterized by continuing high unemployment (between 9% and 10%), a significant reduction in Social Security and Medicare,  and a stagnation in consumer spending.  Borrowing restrictions will be much greater for businesses and consumers, and the “buy it on credit”  binge of earlier decades will be a thing of the past.  Services provided by state and municipal entities will be cut to the bone, or eliminated altogether, as government at every level struggles  to cope with shrinking subsides from the U.S. Treasury.

To be sure, America will survive its  “lost decade”,   just like it has survived even greater challenges in the past.   Unfortunately, there is very little that can be done to avoid this prolonged period of “economic adjustment”.  The effects of past excesses must now be addressed and “paid for” by a recession-weary public, and federal government will no longer be able to borrow its way back to good economic times.  The “die is cast”.  Just ask the Japanese; they’ll tell you what it feels  like to lose a decade.

Rich