Someone asked me a question where the US can get growth from if the consumers take back seat. Here are some of my thoughts I shared with them.

The US economy in 2008 was approx $13.3 Trillion (in 2005 $ adjusted for inflation). Out of this consumer spending was 70 %, Private Investments was 15 %, Imports were 4% and Government spending was 19 %. Out of the so called 2/3rds of US economy that the consumers are (actually it is 70 %), only about 30-35 % is really discretionary (cars, appliances, recreation etc) the rest are expenditures that we need to do (housing, healthcare, insurance etc). So the consumers don't have such a big impact on the economy as we are lead to believe. For e.g. if you and I had reduced our spending in this recession by 10 % (very likely) then the GDP would have shrank by 7 % but it didn't, because we only (probably) cut back 10 % of the 30 % discretionary spending which is about 3 %. So when we say it is consumer driven we are saying about 30 % is driven by "consumerism" and the rest is basic necessities (albeit at different standards of living than the rest of the world). So the question is can we switch to another growth engine. A few thoughts

1. I don't think we should think in growth always as in spending more - we can think in terms of becoming more efficient and reducing waste - our business is likely to make more money in 2009 than 2008 at 27 % less sales because we became more efficient - I think our economy can do that especially with Healthcare (which is 11.5 % of our economy, a 10 % reduction in healthcare waste will boost GDP by 1.15 %).
   
2. We can increase exports - just getting a balance of trade down to zero will add 3.7% to our GDP.
   
3. We can reduce government - the government is about 19 % of the economy in which defense spending is about 4.5 % - fighting two wars and bloated government bureaucracy is a big cause of that. Not likely to happen for at least 1 more year or maybe even 3 more years depending on whether they loose big in the mid term election or not.
   
4. Spur private investment - currently a majority of our investments from corporations are overseas for expansion into emerging markets v/s here in the states. Closed credit markets is also an issue. Unless we have tax incentives for private enterprise to invest we will not have growth in private sector.
   

Of all these fronts I am not terribly hopeful except maybe reversing the import/export balance due to the weak dollar. The consumer spending is not going up until the employment picture and disposable income goes up. I think we are in for a prolonged period of poor or no growth and the current congress/government is not doing much to help the structural issue of inefficiency in the economy.