Father-son team say what recovery?

January 03, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK -- Step aside, Four Horsemen of the Apocalypse. Make way for the Levy family.

That may be a bit dramatic, but David and Jay Levy are a good tonic for those who are optimistic about the U.S. economy.

The father-son team of economists believes that a real, lasting upturn lies years ahead.

The current economic spark, they say, is due to election-year pump-priming that will dissipate this spring.

"It's not an end-of-the-world scenario, but it is what we call a contained depression," said David Levy, the youngest member of the family.

David and father Jay work for the Jerome Levy Economics Institute at Bard College in New York State. The institute publishes its well-regarded "Industry Forecast," which was founded in 1949 by David's grandfather.

The two younger members of the Levy family coined the term "contained depression" in 1990 to describe what they see as a 1930s-style depression limited by the social programs, bank supports and pump-priming of a modern economy.

Government programs such as bank insurance have helped prevent a replay of the Depression, they say. But the causes of the nation's economic malaise are the same: decades of overconsumption and speculation that must be digested through a few years of restructuring.

Although many economists might agree with that analysis, the Levys break with the pack over their forecast for 1993.

Most economists believe that the worst of the restructuring is over, and predict steady growth this year. The Levys, however, say the restructuring is complete.

Today's economic growth, they argue, is the effect of President Bush's pump-priming, including accelerated spending on roads and defense.

In addition, a change in withholding tax laws means that consumers have an extra $20 billion that they must pay the government by April 15, when taxes are due.

The Levys also doubt that economic growth signals the end of a painful period, noting that between 1933 and 1937 the economy grew at an average rate of 8.7 percent.

"What we are going through is not one big recession, but a series of long-term adjustments," David Levy said.

"It will take a number of years, but afterward we do expect real growth. Then we'll be optimistic."

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