An American economist has warned that the U.S. economy is exhibiting signs of deep-seated structural challenges that extend far beyond typical cyclical fluctuations.
Trends in income inequality, debt burdens, and uneven growth distribution are emerging as key vulnerabilities, said Hans Despain, an Economics Lecturer at the University of Massachusetts Amherst, speaking in an exclusive interview with China Global Television Network (CGTN).
"The primary cause of the volatility that we are experiencing can be stated in two phenomenon, a high degree of inequality and also a very high degree of private debt, which is at 142 percent of GDP. Households and businesses are in debt, and that sort of debt level creates weaknesses in consumer spending and investment spending," he said.
While official unemployment figures remain strong at 4.2 percent, Despain emphasized that significant underlying weaknesses are apparent upon closer examination.
"Unemployment is low at 4.2 percent. But if you include part-time workers that want full-time work and also people that are working jobs that don't meet their degree attainment, that number goes up -- the U-6 measure -- to eight percent unemployment, which is quite high. But the real problem is 25 percent of Americans, whether they're working full-time or not, make less than 25,000 dollars a year," said the expert.
Meanwhile, the erratic tariff policies implemented by U.S. President Donald Trump threaten to deepen existing structural issues by raising prices on consumers and cutting into profits. Though many observers had hoped the policies would be a temporary show of force, the administration has shown little interest in backing off from the strategy.
"I'm not very optimistic that they will be as short lived as I was hoping, that they might be politically motivated, which they are. But if he leaves them in place, the long term effect will be, in my opinion, extremely detrimental to not only the U.S. economy and U.S. households, and consumers, but internationally and globally," Despain said.
These challenges may lead to increased inequality, the economist said.
"I think it's secular stagnation, that is to say, the economy may grow, but it does not grow evenly for the demographics. So some people participate in the economic growth, but I would say about 60 percent of Americans do not participate in any increase in economic growth. 80 percent of Americans, their household income is the same as it was in 1973 when adjusted from inflation. Eighty percent of Americans had the same household income, adjusted for inflation, that it was in 1973. And the economy is grown by about 200 percent. So that's a very serious drag on the U.S. economy," he said.
U.S. economy faces structural challenges beyond cyclical fluctuations: expert
