Signs Staggering Economy Could Stumble

More proof this morning that the economy needs a new jolt of government intervention to keep it growing out of the Great Recession: The Commerce Department announced this morning a 2.2 percent increase in gross domestic product during the third quarter of 2009. CNBC reports:

The U.S. economy grew at a much slower pace than initially thought in the third quarter, restrained by weak business investment and a slightly more aggressive liquidation of inventories. … Growth was boosted by government stimulus programs, including the popular cash for clunkers and tax credit for first-time home buyers…”

That report follows a dire prediction from economist Joseph Stiglitz that there is “a significant chance” that the U.S. economy will slip back into decline in 2010, bringing into reality the dreaded “W-shaped” recession.

Stiglitz, a professor at Columbia University, called on Washington to make more funds available to state governments who face a drop in tax revenue. The U.S. economy, the world's largest, must grow at least 3 percent to create enough jobs for new entrants into the labor force, he said. … “If you don't prepare now, and the economy turns out to be as weak as I think it's likely to be, then you'll be in a very difficult position,” he said.

President Obama meets this morning with about a dozen smaller banks, following up on a meeting he did earlier this month with some of the nation's largest financial institutions. This meeting, like the one he did with the too-big-to-fail behemoths, is intended to encourage more lending to small businesses and to homeowners so that the faltering economic recovery can gain some momentum. The Associated Press story notes that “cccording to the Federal Reserve, loans by the nation's 8,000 banks fell 8 percent to $6.7 trillion in the past year, and some analysts expect them to keep falling at least through next year.”

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