Brace for More of the Same in 2009, Experts Warn
Confidence Is Key
Echoing Zandi, Ullman said a new stimulus package has to take the consumer's point of view into consideration, noting the stimulus has to be big enough and sustainable to help consumers quickly gain back confidence in the economy.
“The U.S. has a one-time shot to lead the global economy's resurgence,” he said, adding that it needs to happen within the first 100 days of President Barack Obama's administration.
In addition to a financial package to stimulate consumer spending, Ullman called for the passage of periodic sales tax holidays. He argued that these events — which could take place three times a year, for short durations (e.g., 10 days each) — would help stimulate demand. The states will be reimbursed by the federal government for the lost revenue generated by sales taxes.
“The key for retail is jobs and confidence,” Zandi said. He proposed a $750 billion package composed of both spending increases and tax cuts.
Even if consumers are willing to buy, a lack of credit is constraining many purchases. With the economy in the throes of a debilitating recession, attitudes toward spending are changing dramatically.
“This is a psychologically scarring event," Zandi said. "People won't be able to spend their income,” citing the lack of available credit.
Ullman backed up Zandi's comments. “The next generation is going to have to learn to live their life with what they can afford.”
Where to Go From Here
Solomon advised the audience to take a pessimistic view for 2009, focusing their efforts on survival. “All you want to know is how much cash you have each day,” he said. “Survive, don't worry about investments. Ignore the numbers, harbor cash and then a year from now, look around to see what you should do.”