Future Implications of Debt and Deleveraging in the United States Economy

This paper will take a broad based approach in analyzing the structure of the U.S. economy with a particular emphasis on the disruptive U.S. recession and financial crisis which began circa 2008. The role of the U.S. government and the implications high levels of fiscal debt have on the projected growth path of the U.S. economy will be the primary focus of the paper. The discussion will show that the U.S. has likely entered a new, much more difficult stage in its history of economic growth. The short to medium term growth potential of the U.S. economy has fallen below the trend level established since WWII. The flexibility of the U.S. economy will help foster the necessary adjustments; however, this new era will force difficult fiscal and monetary policy choices that have different implications for different section of the population. The policy makers must recognize the changing dynamics of the U.S. economy and they must be prudent in drafting policy that establishes a stronger foundation for future growth. Younger generations in particular will need to take notice of the decisions being made and plan accordingly as it relates to their spending, saving and investment habits. JEL Classification E61, E65, H6