Harvard scholars have agreed that high leverage is a deep-rooted problem with both the US government and households.

"Government has never been more highly leveraged, because of all the spending and the previous choice made on tax and foreign policies," said Robert Kaplan, co-developer of both the Activity-Based Costing and the Balanced Scorecard, which are used extensively in business and industry, government, and non-profit organizations worldwide.

Kaplan has been nominated one of the top 25 business thinkers by the Financial Times and has been elected to the Accounting Hall of Fame, and can thus be considered a business pundit.

Kaplan warned: "Household balance sheets are a wreck! Its debt to Gross National Product has never been higher. So households have got to save for a number of more years!"

In his view, having banks to lend again presents another difficult problem.

Already 115 banks have gone out of business in the United States in the first 10 months of 2009, and Kaplan believes there will be more regional bank failures in the future.

He explained that about 70 percent of the loans fulfilled in regional banks is real estate-related while the remaining 30 percent consumer-related. But it is exactly the opposite for big banks -- 30 percent real estate-related and 70 percent consumer-related.

"So the irony here is that many regional banks are not well setup to lend and are trapped in their local geographical area.

"We not only need the small regional banks throughout the country to be able to lend, but also the big money center banks to actually extend credit to small businesses," added Kaplan, who believes that in addition to incentives to small business lending, the government should emphasize on investment tax credit, potentially the accelerated depreciation, to help business create jobs.

"It's a very scary time and I think we are in a transition that it's not very clear whether we are making any progress of any consequence yet," said Segal.

But there was one thing these scholars agree: one year after the full outburst of the global financial crisis, the US economy is still on life support and should receive more government stimulus.

(Xinhua News Agency November 25, 2009)