"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.
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.