Check 'em off. President Obama's first 100 days: done.
Now get ready for the hard part: the next 1,000 or so days.
That's about how long the United States and the rest of the world have to turn the anemic economic growth that now seems likely into the kind of strong economic growth we need to pay down the huge pile of debt we've created in our efforts to stave off a global financial meltdown.
Without growth higher than is now projected, the burdens of this crisis will linger for a generation in the form of lower living standards and higher interest rates, taxes and inflation. And, unfortunately, the world's economic experts know even less about creating stronger growth -- without creating a bubble -- than they do about fixing a global credit crunch and a deep recession.
Projections don't look good
It's not that stopping the global financial crisis was easy. Or that the world banking system is fixed and the world economy is on the road to a turnaround. Despite considerable progress, it remains very much a work in progress.It's just that the next part is even harder. Most of the world's economies -- the United States', the United Kingdom's and Japan's, in particular -- have dug themselves very, very deep holes in an effort to end the economic and financial crises. Strong economic growth, for a decade or so, offers the only comfortable way out of the hole. Alternatives such as runaway inflation or Draconian cuts in living standards have major, what shall we say, disadvantages.
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But all the signs point to what amounts to only anemic economic growth at best. The world economy, according to projections by the International Monetary Fund, will contract 1.3% this year and grow just 1.9% in 2010.
Unemployment in the major world economies won't peak until near the end of 2010, the organization projects. And the longer-term news for growth is just as depressing: The U.S. economy, for example, won't return to its full potential growth until 2015, according to the Congressional Budget Office.
Europe, Japan suffering, too
The short-term hole many of the world's developed economies face is daunting. In the United Kingdom, in many ways the worst hit of the world's major economies, the government's budget deficit is projected to reach 9.8% of gross domestic product in 2009 and climb to 10.9% in 2010. Japan is next worst off, with an annual deficit of 9.6% of GDP in 2009; the U.S. follows, with 8.8% of GDP.The biggest deterioration, though, is in Germany, where the annual deficit is expected to climb to 6.2% of GDP in 2009 from 4.7% in 2008. That's a result of the collapse of the German economy, which is projected to shrink 6% this year. That's the worst decline for Germany's economy in the post-World War II period.
These immediate deficits wouldn't be so bad if 1) many developed economies hadn't racked up such big accumulated debt loads in the years before the crisis and 2) so many weren't facing huge, long-term challenges from an aging population or, in the case of the United Kingdom, from rapidly dropping oil revenue.
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Is the drop in GDP a good thing?US first-quarter GDP may have dropped 6.1%, yet Wall Street has responded with cheers. Jim Jubak says that's because the recession is starting to look a little more 'normal.' (April 30)
Debt in US, United Kingdom will rival GDP
What's the long-term picture? Japan's accumulated debt burden is projected to climb to 197% of GDP in 2010, according to the Organization for Economic Cooperation and Development.Government calculations in the United Kingdom put the debt burden at 76% by 2013, up from just 50% in 2008. Economists outside the government say the assumptions in those calculations are too optimistic and put the debt burden at 80% by 2013. In the U.S., the accumulated deficit is projected to climb to 77% in 2010 from 70% in 2008.
- If you're Hungary, a country with relatively untested financial institutions, an accumulated deficit of 70% triggers a financial crisis that requires a bailout by the International Monetary Fund, as happened this year.
- If you're the United Kingdom, with one of the oldest central banks in the world and a government that the financial markets believe will tax its population into penury rather than consent to an Argentina-like default, you can run a 70% debt burden without losing your AAA credit rating.
- If you're the U.S. and own the printing presses that create the world's reserve currency, you keep your AAA credit rating because the world holds so much of your paper that a downgrade is simply too painful to contemplate.
Continued: Inflation, slow growth, higher taxes
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