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Economists: Pre-Recession U.S. Economy Is 'Not Coming Back


"It's not coming back."

"The economy that we had before the recession is gone," said Kenneth Goldstein, an economist for the Conference Board, a group that provides economic and business advice and research to its member companies.

"It's not coming back."

The U.S. economy is being transformed into something new; something where businesses invest less and consumers spend fewer dollars, Goldstein told The Huffington Post in an interview.

What would be necessary to return the country to its pre-recession growth?

According to Goldstein, “businesses, consumers and the government would need to spend at least $1 trillion more than they are likely to spend in order for the economy to return to its pre-recession growth rate.”

Of course, no one is going to invest that kind of money to jumpstart the economy, since consumers are nervous about spending and businesses expect a lower return on their investments.

"Where's the money?" Goldstein asked.

The main problem is that consumer expectations for the future have all but deteriorated, Goldstein said.

“They suffered from such a large economic shock in 2008 and 2009 that many older people now do not expect to return to work, and many younger people no longer expect to make that much money,” he continued.

Naturally, Americans have cut back on spending.

“Consumers are indeed saving more than they did before the recession,” writes the HuffPo’s Bonnie Kavoussi, “They saved 3.7 percent of their incomes at the end of 2011, in contrast to less than 2 percent of their incomes during all of 2005, according to government statistics. Their wages, when accounting for inflation, actually fell in 2011

Consumer confidence has been stuck at recession levels for the past four years, according to the Conference Board's Consumer Confidence Index.

“Like consumers, businesses are spending less because they have lowered their expectations of future income,” Goldstein said. “While businesses could expect returns of 8 to 12 percent on their investments before the recession, they are now expecting returns of about half that amount. If they raise prices too much, consumers will choose cheaper alternatives.”

However, despite these bleak areas, Goldstein believes there is one tiny, sliver of hope: U.S. exports. Exports have actually helped the U.S. deal with its sluggish economy.

But even that small sliver of hope is short-lived when one takes into account the eurzone's current financial debacle.

As reported earlier on The Blaze:

Consider the $240 billion that the U.S. made from exports to the EU and compare that to the $91.1 billion that the U.S. made from China. It would stand to reason that a total collapse of the eurozone could have disastrous economic repercussions in the U.S.

So, although U.S. exports are contributing to an otherwise staggering economy, it is all contingent on whether or not the eurzone is plunged into total and complete ruin. That's not very reassuring.

“Now that people's homes are often worth less and credit is expensive, people are relying on their wages to be able to spend money -- and their wages have barely been growing,” said Lynn Franco, director of the Conference Board's Consumer Research Center.

Economic growth will be slower than it was before the recession for the near future, since consumer spending comprises two-thirds of the U.S. economy, according to Franco.

"If you just take a look at the fundamentals alone," she said, "you cannot get back to the levels of consumer spending that we had prior to the crisis."

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