The U.S. economy is too reliant on consumers, according to White House economic advisor Paul Volcker. He told President Barack Obama on Monday that trimming our dependence on the consumer could come in the form of boosting exports, enhancing the national infrastructure and investing in green technology. Volcker, who used to be chairman of the Federal Reserve, believes that with consumer spending responsible for 70% of the U.S. economy, it requires “the magic of financial engineering” to keep it afloat. Simply, he said, “We cannot have so much consumption.”
If we try to rebuild the economy in its previous image, Volcker believes, “It will just break down again,” he told a global financial conference in Naples, Florida.
When it comes to the spectator sport known as the U.S. economy, there’s only one stat I really give a shit about: consumer spending. Jobs rely on consumer spending. Stock market performance relies on consumer spending. Corporate spending is an outgrowth of consumer spending. You get the point. Unless consumers are prying open their wallets, don’t expect much else to happen (except IT spending, which is up mostly because expenditures have been put off for too long).
Our neighbors to the north are trying to bring the heat on us. When I was up in Montreal two weeks ago, I did hear the usual “mine is bigger” argument going on in the lobby of the Opus Hotel, as a Canadian went on and on and on about healthcare. The day before, a bit of channel surfing brought me to Prime Minister Stephen Harper, talking about how Canada had fared better than the United States through the worldwide financial crisis. Now, the Canadians are saying that the U.S. has to do a better job of managing its financial system, because when Americans sneeze, the rest of the world blames us for giving them a cold.