May 6th, 2013
10:05 AM ET

U.S. economy 'prettiest house on an ugly block'

"Fareed Zakaria GPS," Sundays at 10 a.m. and 1 p.m. ET on CNN

Fareed speaks with Financial Times journalist Gillian Tett and TIME’s Rana Foroohar about the state of the U.S. economy. To see the full interview, download the show at iTunes.

You wrote a column where you said everyone's looking at these economic numbers from the U.S. and saying they’re bad.

Foroohar: Right.

You actually found a silver lining.

Foroohar: Well, absolutely. You know, government spending has been down. We’re feeling the effects of the sequester. And if you look at the 2 percent economy which we've been on now for a couple of years, that’s in part due to the fact that the public sector has cut back so much. But if you strip the public sector out, the growth numbers actually go up above 3 percent, to about 3.1 percent. And most of that is down to the consumer. You know, American consumers have actually done a really good job of balancing their budgets, getting out of credit card debt, managing their own personal finances. And now they can dip a little bit farther into savings than they used to. And that’s what they did last quarter.

Tett: Absolutely. Rana is right. And she’s highlighting one of the great unsung stories of the last year, which is that consumers have actually managed to adjust to the new normal, if you like. Credit card debt, which is such a key factor in creating pain for millions of American households during the bubble, that credit card debt is now down at a 10-year low, so that people actually have been trimming their spending. And what that means is that the consumers are in not quite the kind of situation that your grandfather was in, you know, 40, 50 years ago, in terms of debt, but certainly something much healthier.

So you said, taking out the effects of reduced government spending this economy looks pretty good. That is, the private sector engine, companies and people, is moving pretty well. Do you think that people now feel that the government has been cutting back too much in a period of weak economic demand? In other words, are we actually witnessing a kind of shift where people are going to say enough austerity, let’s try to actually do anything, because I hear the academic debate, but I don't see any government policy changes.

Foroohar: I think political gridlock in Washington is going to make it hard to come up with the kind of spending that would actually be useful. I mean, yes, I would love to see more spending on things like infrastructure, on education. You’ve written about that. We’ve all talked about that. I think that that's going to be difficult. But there is this push back now against austerity. We can see that it hasn't worked well in Europe. And we can see that the government and public spending, the lack of public spending, is a real drag on growth in this country. And we just have the effect of being the prettiest house on an ugly block, you know, so we’re still doing pretty well compared to others.

Topics: Economy • United States

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soundoff (10 Responses)
  1. rightospeak

    No wonder we have a mess with this kind of foolish, ignorant reporting financed by the oligarchs that are ripping off the old USA. Try writing that the crippled economy is not going to improve unless offshored jobs return. How is that for an analysis ?

    May 6, 2013 at 5:46 pm | Reply
    • Red-necked logic

      Amazing the reason to spend again is that Europe's austerity has failed when it has not even gotten out of the gate yet.

      On the otherhand, if you look at Europe's 60 years of socialism since World War II it is easy to see why they are exactly where they are. The out of control spending check always comes due. No other form of government other than capitalism has ever lifted an entire group of people into prosperity.

      Why? Because it fosters responsibility and the pie grows faster for all instead of squabbling over who gets what from a fixed pie. Communism while utopic in principle, never takes into account human nature to be sloth-like and greedy. Instead it just installs a new "Aristocracy".

      I have always felt that we should let the strongest of us lead in every endeavor, not the most politically connected. If not for the upcoming natural gas/oil boom and the petro dollar, we would be in exactly the same place as Europe where our credit would be exhausted as well.

      Spendiing is okay to help drive an economy, it just can't be the engine. Oil or lubricant, maybe. Heck maybe some day one of my descendants will be the best and the brightest. Won't ever happen in a government dominated society.

      May 9, 2013 at 12:56 pm | Reply
  2. Matt A.

    I would suggest going to for the reality check not found with lamestream media.

    May 6, 2013 at 7:00 pm | Reply
  3. jackinbox

    Bravo, we are the least socialist within the socialist bloc

    May 7, 2013 at 12:10 am | Reply
  4. j. von hettlingen

    That credit-card debt has gone down in the US is really a phenomenon. It just showed that Americans were ready to cut spending before it was too late. There are some in Europe, who believe austerity is just for the others and try to stick to their usual life-style, until they one day face reality, that it's no longer possible.

    May 7, 2013 at 11:11 am | Reply
  5. Yanozik

    I agree 100% with rightospeak, Most of the media kissing a Dem President. Doesn't matter what!
    Obama haven't realize that elections are over. Do something! Bring back jobs to America That's the first step....

    May 7, 2013 at 7:31 pm | Reply
  6. Michael

    U.S. economy 'NOT prettiest house on an ugly block', U.S. businesses 'NOT prettiest companies on an ugly block'.

    May 9, 2013 at 5:53 am | Reply
  7. Bhujangarao Inaganti

    We are all engaging in empty rhetoric in analysing our economy. I am of the opinion that technology has overwhelmingly taken control of the economy and redundancy of the existing workforce in an unimaginable strike leading to chaos in the jobs sector. We can only repair it by educatng our future workforce to th requirements of the new economy ina speedy manner and it will take some time and till then we have to manage our lives with caution.Till then you can not get help from the presnt congress which consists of old people more in proportion,who cannot follow the transformation happening in the economy.

    May 12, 2013 at 10:46 am | Reply
  8. vistar hornbill

    The biggest roadblock to America's furrher economic progress and recreation of more jobs – is the Republican Congress.
    Everyone knows it, but nobody is doing anything to stop the cowboys from blocking more of Pres Obama's economic plans.

    May 13, 2013 at 8:53 pm | Reply

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