What is the state of the U.S. economy?
Robert D. Hormats is the U.S. Under Secretary of State for Economic, Business, and Agricultural Affairs. He was formerly vice chairman of Goldman Sachs (International) and managing director of Goldman, Sachs & Co.
Hormats has also served as ambassador and deputy US Trade Representative, and senior deputy assistant secretary for Economic and Business Affairs at the US Department of State. He was a senior staff member on the National Security Council and senior economic advisor to National Security Advisors Henry Kissinger, Brent Scowcroft, and Zbigniew Brzezinski. Hormats has received the French Legion of Honor and Arthur Fleming Award.
Mr. Hormats has been a visiting lecturer at Princeton University and is a member of the Board of Visitors of the Fletcher School of Law and Diplomacy and the Dean's Council of the John F. Kennedy School of Government at Harvard University.
Mr. Hormats' publications include Abraham Lincoln and the Global Economy; American Albatross: The Foreign Debt Dilemma; and Reforming the International Monetary System. Mr. Hormats earned a B.A. from Tufts University with a concentration in economics and political science; an M.A. and a Ph.D. in international economics from the Fletcher School of Law and Diplomacy.
Question: What is the state of the U.S. economy?
Robert Hormats: The state of the U.S. economy, when you look at the aggregate numbers, is good. The economy’s probably weakening somewhat in large measure because high oil prices suck out money from people’s pocketbooks, which means they can’t spend it on other things.
The other is that the housing market, particularly the so called sub-prime housing market, has deteriorated. Home values have stopped going up. In some cases they’re going down. That puts an enormous amount of stress on a certain group of consumers; but in aggregate, the economy looks pretty good.
The problem is that for many Americans, the economy and the outlook are very uncertain. For instance, if you’ve got two or three kids, and you’re uncertain about your job, you’re concerned your job might be outsourced, that’s obviously a source of considerable concern.
Education costs are going up if you want to send your kids to college. That’s a major concern.
Oil prices, gasoline prices are going up which, as I say, takes money out of your pocketbook, out of your wallet, which means there’s less money to spend on other things.
There is a concern among many people that they’ll lose their health insurance. Their company will stop providing it. Or when they retire they won’t have sufficient health insurance.
People are concerned about Social Security, whether it’s going to be there 10 or 15 years from now. And there’s a real risk that as people age in this society, they simply will not have the resources to live a decent living standard.
And the other is that they are concerned that their children will be saddled with large amounts of government debt. They’ll be saddled with the prospect of higher taxes to pay for Social Security and Medicare. They’ll be saddled with increased national dependence on foreign oil.
That all these things may mean that the coming generation may not have the same living standards or the same opportunities as the past generations, in particular because education might not equip some of them with the capability to perform at a high level in a knowledge-driven, global economy.
Recorded On: July 25, 2007
Oil ties up a lot of money.
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