EconomicCrisis.US

As the economic crisis has eased in recent months, a questionable international consensus has emerged: The global economy needs to be rebalanced. “We cannot follow the same policies that led to such imbalanced growth,” President Barack Obama said during his Asia trip last month. European Central Bank head Jean-Claude Trichet declared in September that “imbalances have been at the roots of the present difficulties. If we don’t correct them, we’ll have the recipe for the next major crisis.”

These global “imbalances” supposedly include excessive American consumption, too much trade flowing from Asia to the West and not enough from the U.S. to Asia, and too much saving combined with insufficient spending by Chinese consumers. But what if the whole notion of global imbalances is a myth, and that policies to reverse them only make things worse?
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Health care may be dominating the debate in Washington now, but the explosive issue lurking behind the insurance battle is how to confront the soaring federal budget deficit and national debt, which some lawmakers and experts say threaten the fiscal solvency of the country.

The idea gaining the most steam lately is an old Washington favorite: toss the deficit problem to a blue-ribbon commission. A group of lawmakers from both the House and Senate is proposing the creation of a bipartisan panel to come up with policy recommendations to be voted on by Congress.

The budget gap now stands at a record $1.4 trillion, and it is worsening. The deficit is projected to grow by an eye-popping $9 trillion over the next decade. The national debt is more than $12 trillion. The remedies aren’t pretty for politicians and taxpayers alike. The consensus view of both lawmakers and outside experts is that the only way to deal with the deficit is a painful and politically toxic combination of tax hikes and spending cuts, most likely to popular entitlement programs such as Social Security, Medicare and Medicaid.
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As the end of a tumultuous economic year approaches, the PBS NewsHour asked several economists and financial experts to look ahead to 2010 and answer one question: What is the economic indicator to watch and why?

Tyler Cowen

Professor of economics at George Mason University

If you’re going to watch one economic indicator this year, it isn’t the jobless rate or stock prices. It should be the economy of China.

So far most of the global economy has gone through “the Great Recession,” as it is being called. Except China. Is the Middle Kingdom doing something right or is the downturn simply coming to China a bit later? You might know that in the 1930s, the Great Depression also came to China a few years later than everywhere else.
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After receiving billions of dollars in government bailouts, U.S. banks are under increasing pressure to start lending money again. With banks paying back emergency government loans faster than expected, President Obama is reminding bank executives that it is their turn to help the U.S. economy. But as 2009 comes to a close, some analysts warn the banking crisis is far from over.

As U.S. banks repay billions of dollars in government bailout funds, President Obama held meetings with top bank executives in December, telling them it is time to return the favor.

“The way I see it, having recovered with the help of the American government and the American taxpayer, our banks now have a greater obligation to the goal of a wider recovery,” President Obama said.
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