saving more. consuming less. Paying down debts. Making sacrifices. Most Americans have not experienced austerity in a long time, so the decade ahead may come as a shock. Expect continued high unemployment, slow wage growth, the possibility of social and political unrest, higher taxes, cuts in government services. Hope for moderate inflation to help reduce public and private debt loads. And be happy if all that is the only price this country must pay as part of the financial hangover from the party that began in 2001.
Photograph by Stu Rosner
As the United States recovers from the “Great Recession,” economic stimulus has so far masked the austerity ahead. The U.S. government, like others around the world, has solved the post-housing-bubble banking crisis by issuing debt—in effect trading one set of problems for another to create what Cabot professor of public policy Kenneth Rogoff calls “an illusion of normalcy.”