Greater challenges ahead

It is certain that the US economy's return to growth is good news for the world economy. But the sustainability of that return is not without uncertainty.

First, although the government is quite aware of the importanceof job creation, the high unemployment rate will not fall to reasonable levels soon, which means the economy will suffer longer than predicted.

"Even if we've turned the corner, we know it's a long way before we're completely recovered," Christina Romer, chair of the White House Council of Economic Advisers, said. "You can't have an unemployment rate of 9.8 percent and not be deeply troubled."

The Federal Reserve and many other economic institutions do not expect the unemployment rate to drop below 9 percent in 2010.

Second, the long-lasting debt problem seems hard to resolve.

The Treasury Department announced on October 17 that the federal budget imbalance of the fiscal year ending Sept. 30 had soared to US$1.42 trillion, which accounts for about 10 percent of the total GDP, the highest proportion since World War II.

The US House rolled out the health care legislation Thursday, which will add an US$894 billion fiscal burden in a 10-year period.

"Policy-makers have options to bolster the recovery, but they should be mindful of the long-run costs, particularly in terms of the budget deficit," said Karen Dynan, vice president and co-director of Economic Studies at the Washington-based think tank, the Brookings Institution.

The third uncertainty is the dollar itself.

Put into a global perspective, the US growth was partially based on the devaluation of the dollar -- the still dominant reserve currency in the world.

Statistics showed that the US dollar had devaluated more than15 percent against major currencies since March this year.

The Washington Post reported Thursday that "the dramatic decline of the US dollar is aiding the American economic recovery but setting off alarm bells overseas, with corporate executives, politicians and pundits calling it among the biggest threats to the rebounds underway in other parts of the world."

Besides, there are many other obstacles that lie ahead of the economic recovery, including the still tight credit condition, theailing banking system and the impending threat of inflation.

The US National Association for Business Economics predicts growth would slow to a 2.4-percent pace in the fourth quarter. It also expects a 2.5-percent growth rate in the first three months of next year, although other economists believe the pace would slow further, closer to 1 percent.

"There is a great deal of uncertainty about the strength and speed of the nation's recovery, with gradual expansion being the most likely economic scenario," Dynan concluded.

(Xinhua News Agency October 30, 2009)