Local Economist Says Recession Is a Strong Possibility

The real estate market has created spillover effects to other key sectors of theeconomy, particularly the financial sector. That brings us to the question...arewe headed into a recession?

"If we have a recession, it won't be as bad as many people fear, but regardless ofwhether we have a recession, it's likely to be much more prolonged than people think."

Dr. Barton Smith, director of the Institute for Regional Forecasting at theUniversity of Houston, says the US economy is showing some of the characteristics of the booming Japanese economy in the 70s & 80s before itcrashed in the 90s:

"After that crash, it's just incredible stagnation of the Japanese economy. The question is...are we headed for something like that? Some people have talked about the wordSTAGFLATION. I think that's the wrong word, but we are at risk of at least seeing a prolonged economic slowdown partly because of the types of solutions that politiciansare coming up with right now are quick fix solutions that's not gonna last."

They're not addressing the underlying problems of the American economy and proposals being considered might do more harm than good.

"We got into this mess because Americans as a whole government have been spendingbeyond their means. And so, what are we trying to do? We're trying to induce the consumerto keep spending. Don't ever quit spending. We're having to paddle our way upstream harder and harder to try to keep ourselves from going backwards—wrong move."

Houstonians have weathered the national crisis because of the strong energy sector, but Smith says we need to recognize that we're not immune:

"The Houston consumer is no different than the American consumer. They're feeling thepinch in the pocketbook with three dollar and fifty-cent a gallon, and they'll really feel it thissummer when they have to pay their air conditioning bill. So, many of the problems that we face are problems that the U-S economy faces. So, we're not immune. We're just cushioned thank goodness, because we've got the energy economy right now that's cranking out jobs."

Wherever we go in the next few months is almost irrelevant to where we're headed in thenext few years, and Dr Smith says we have to change our consumptive behavior and startliving within our means.

Pat Hernandez. KUHF-Houston Public Radio News.
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