An Iowa State University economist says the recession has changed consumer attitudes — and that could delay an economic recovery. Economist Neil Harl, who is also a lawyer, says being "thrifty" has become trendy.
"I think we are undergoing a massive change in our thinking as consumers and if consumers aren’t convinced that they should be spending, we’re going to have a very long slog before we’re out of this," Harl says. "I’ve said that we could have three to five years of something less than what we had when we started."
Harl doesn’t expect the economy to "bottom out" until late this year or early next year. Other economists have forecast a quicker recovery, but Harl cites the "fear" among consumers as the basis for his more pessimistic outlook.
"People became fearful, very concerned about their future," Harl says. "It’s become chic, it’s become ‘the thing to do’ to be thrifty, to be saving — and you didn’t hear that five years ago or 10 years ago."
Harl says a "huge amount of debt" was amassed in the U.S., so saving rather than spending is a good thing.
"We had lived beyond our means as individuals, as families, as governments and as companies and we have to pay off that debt," Harl says. "Interestingly, the savings figures look very positive if you take the very long view, but if you are concerned about how fast we are going to come out of this recession, those higher savings numbers don’t look so good."
Harl made his comments during taping of tonight’s "Iowa Press" program which airs at 7:30 on Iowa Public Television. It will be rebroadcast Sunday morning at 11:30.