Stemming the Current Economic Downturn Will Require More Stimulus

摘要

The current economic downturn follows the weakest recovery on record, making prospects for a consumer-led recovery unlikely. Families are more financially constrained than at the beginning of any prior downturn as they face rising unemployment, high prices, dwindling assets, historically high debt, and real incomes that are lower than they were over eight years ago. The weakness of household finances means that absent aggressive government action, the current downturn could be particularly long-lasting and severe. Consumer spending is already declining sharply. Falling household spending--which makes up nearly three-quarters of Gross Domestic Product--means businesses have limited incentives to invest. Declining consumer spending and business investment, combined with the decline in housing prices, will continue to drag down domestic demand for goods and services, leading to further job losses and still greater declines in family income and spending.