Treasury Secretary Timothy Geithner talks to Good Morning America about economic growth.
America is in the midst of an unprecedented and, therefore, unpredictable economic downturn. We are at an inflection point with pessimists and optimists differing on where we’ll go in the near term. The Treasury Secretary, Tim Geithner, by definition is an optimist as witnessed by his piece in Tuesday's New York Times.
Main Street is certainly not experiencing the same optimism that Wall Street is.
He cites a series of economic trends that he believes will support a growth scenario. The problem is that many of the statistics such as employment are either improving very little or continuing to decline despite the large-scale fiscal and monetary stimulus over the last 2.5 years. One critical ingredient is confidence. In July, 9 percent of American households rated business conditions as being “good,” while 44 percent gave the business background a “bad” rating. Consider that in expansions, consumer confidence averages 102, and in recessions it’s 71. The July numbers are at 50.4, reflecting a level of consumer confidence 20 points below the norm even during a recession. That explains why American families are saving more, as Geithner points out—the flip side is the pressure on real consumer spending, which makes up 71 percent of GDP.
• Harold Evans: Geithner's Feckless Jobs RemedyMeanwhile, housing demand continues to soften. The level of vacant home sales, the shadow inventory of units that are empty, but not yet in the market, has put the total vacant supply at 5.7 million units, threatening further decline in housing prices. So the combination of declining consumer sentiment, incomes because of unemployment, and consumer net worth, reflecting the decline in housing prices, are critical to the prognosis about our economic future.
We all hope, as the secretary put it, that we are coming back, but it is way too early to be sure. Main Street is certainly not experiencing the same optimism that Wall Street is. Unlike the last several years, let us hope that the pessimists are wrong this time and the optimists are right.
Mortimer B. Zuckerman is chairman and editor in chief of U.S. News & World Report and publisher of the New York Daily News. He is also the co-founder and chairman of Boston Properties Inc. He is a trustee of the Council on Foreign Relations, the Washington Institute for Near East Studies, and the International Institute of Strategic Studies.