U.S. Economy Held Back By 'Negative Forces,' Expert Says

By Agence France-Presse The fundamentals of the U.S. economy remain strong, but a number of "negative forces" will keep it below potential, said economics Nobel laureate Joseph Stiglitz. Stiglitz, who was awarded the Nobel prize for economics last year and is a professor of economics at Columbia University, was speaking in testimony before the Senate Banking Committee on the U.S. economic outlook on March 12. He noted that the national savings rate remains dismally low and that pent-up demand is unlikely to spur growth during the current recovery. "Given that consumption has not fallen in the way that it does in a typical downturn, it is unlikely that an increase in consumption will provide a strong impetus for growth in the short run," Stiglitz said. "The heavy indebtedness of the consumer may impose an important dampener on spending, one which will become especially important if interest rates rise." Stiglitz also said there is a continuing concern about the problems of accurate and clear valuations of earnings in the corporate sector. "Enron and Global Crossing confirmed the suspicions of the skeptics, and today, many if not most investors feel high levels of uncertainty about the numbers that many corporations are reporting," he said. He added that this could dampen stock market prices in the near future. Stiglitz also added that the $10 trillion U.S. economy "has a potential for growth of between 3% to 4%." Copyright Agence France-Presse, 2002