The recession is over, but a long-term recovery depends on the ability of business to pick up where the federal government leaves off when $787 billion in economic stimulus money runs out, the chief economist for the Associated Builders and Contractors Inc. said Monday in Spokane.
Anirban Basu said stimulus spending will peak in 2010. When that money is gone, the federal government will be “exhausted,” he said.
Business will have to step in just as more taxes are imposed to close the federal deficit, and interest rates are raised to control inflation, Basu predicted.
“If ever there was the prospect of a double-dip recession, this is it,” he said.
Basu criticized stimulus spending for its focus on projects that, while ready to go, do not address deficiencies in railroad and broadband capacity that put the United States at a disadvantage compared with other developed countries.
More efficient infrastructure, he said, would help American manufacturers in particular offset some of the cost advantages of foreign competitors.
Americans making goods for Americans is the key to a strong, middle-class economy, but manufacturers have been hit hardest by the recession, Basu said.
The U.S. has lost 7.2 million jobs in the current recession, more than the country added during the post-2001 recovery, he said. “It will take years to replace those jobs.”
Basu, based in Baltimore, said the revival of personal savings, and the potential for the U.S. to produce more of its own energy, are optimistic signs.
After years of government and personal overspending, Basu said, “It’s payback time.”