Q: Thank you for joining us today, Mr. Robert. What do you point to as the main reason our economy’s recovery is taking so long?
Stephen Robert: Simply put, a depression of this magnitude simply cannot be repaired overnight. Our leaders continue to pose solutions that aim to repair the damage in two or three years. As with the Great Depression, working our way out of this situation will take many years.
Q: How important is an understanding of the reason for the decline itself?
SR: We can’t fix what we don’t understand. In short, our consumer and government debt is both the source of the problem and an impediment to a solution. Household debt as a percentage of disposable income rose from 65 percent in the 80s to 130 percent in 2006, as consumers eschewed savings in favor of easily attainable credit lines. With the credit collapse, millions had to struggle to pay off their debt. As Americans prioritize debt repayment over consumer spending, America’s GDP will continue to lag.
Government debt is unsustainable, having risen to 100 percent of the nation’s GDP. Much of this debt is due to unfunded Medicare, Medicaid, and Social Security payments. With no financial reserves, the government is unable to utilize traditional fixes, such as economic stimulus packages, without incurring further debt.
Q: In your view, what can be done to speed the recovery?
SR: We need to boost consumer confidence through economic stability. Balancing the budget by reducing health care costs should take priority. Another tactic is to forego short-term stimulus packages like Cash for Clunkers and build future programs around long-term investments.