Economists often view savings as a virtue and spending as a vice. But not in this period of economic stagnation, says star Yale University economist Robert Shiller.
“For now, we must pin our hopes for a robust recovery on the willingness of millions of consumers to spend substantially more,” he writes in The New York Times.
Actually, Shiller would love to see the government do the trick with another fiscal spending package, but that’s obviously not going to happen with Republicans in control of the House.
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Shiller points out that consumer spending has been framed in terms of patriotism, and not just by Democrats.
For example, shortly after the Sept. 11 terrorist attacks, President George W. Bush urged Americans to “Get down to Disney World in Florida. Take your families and enjoy life, the way we want it to be enjoyed.”
Consumer spending surged in October 2001, helping to lift the economy out of recession.
The recent news on consumer spending isn’t particularly encouraging. Retail sales rose only 0.1 percent in December, slowing from November’s 0.4 percent increase and lagging economists’ expectations.
“A lot of the euphoria around the holiday shopping season was misplaced,” Neil Dutta, an economist at Bank of America, tells Bloomberg.
“The weakness in December implies that the handoff into the first quarter was weak. The savings rate is going higher, and that’s going to be a headwind for consumer spending.”
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