Ideal Business Consultants

There are plenty of theories and explanations for the economic crisis that has afflicted the United States for years now, but they all miss the element of the continuing malaise—its really about the bursting of the decades-long consumer spending bubble, writes David Leonhardt in the New York Times. “Discretionary service spending” has never fallen more than 3% in a recession in decades—in this recession, it has fallen 7%. “If you’re looking for one overarching explanation for the still-terrible job market, it is this great consumer bust,” says Leonhardt.

“We are feeling the deferred pain from 25 years of excess, as people try to rebuild their depleted savings,” he says. No consumer spending means no business hiring. And this time, there is no more debt to tide people over. The big danger lies in government slashing spending or defaulting on the national debt. “If governments stop spending at the same time that consumers do, the economy can enter a vicious cycle, as it did in Hoover’s day,” writes Leonhardt.

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