Any recession in the United States is at least two years away and would be caused by factors not at work now, a prominent economist said.
Lawrence Chimerine, senior vice president and chief economist of the Economic Strategy Institute in Washington, said Americans should relax and continue to enjoy the economic expansion, which already has lasted eight years.
Taking a view contrary to that of many other economists, he said gloom and doom about an imminent downturn are premature.
Other economists are fixated on the growing gap between consumer spending and income. In the third quarter of 1998, total household debt was growing at an annual rate of 8.3%, versus a 5% rate of income growth. Mortgage debt was growing particularly fast, at 9.1%.
But Mr. Chimerine said he sees growth in mortgage debt as a positive sign. "Isn't it good that more people own homes?" he said during a conference sponsored by HNC Software Inc. this month in San Diego.
Mr. Chimerine said he considers government figures on consumer debt inflated. He pointed out that small-business debt is counted as consumer debt. And data on credit card delinquencies include card debt that is only 30 days past due and might be paid during the next billing cycle, he said.
"Any objective analysis shows that people are not living beyond their means," Mr. Chimerine said.
He did say that some consumers are abusing the bankruptcy system and called it a "75% probability" that bankruptcy reform legislation will pass this year. Mr. Chimerine has testified before Congress about bankruptcy reform on behalf of MasterCard International.
Contrary to some popular viewpoints, Mr. Chimerine said he does not think the U.S. economy is vulnerable because of crises in Asia and Latin America or because of unprecedented levels of consumer debt.
The U.S. economy is far less dependent on exports than are the damaged economies of the emerging markets, Mr. Chimerine said. About 75% of the U.S. economy depends on domestic activity like retailing and housing.
"The financial condition of most Americans is better than at any time in the last 30 to 40 years," Mr. Chimerine said. "Everyone who wants a job has a job, and wages are creeping back up."
During the last seven years, Americans' financial assets have grown seven times as much as their debts, he said. Today more than half of Americans have investments in the stock market, primarily through 401(k) plans and other retirement programs.
These factors insulate the U.S. economy for now, Mr. Chimerine said. But this expansion has lasted three years longer than a typical boom cycle, he added, and an end is inevitable.
He said he believes consumer confidence is among the most important indicators to watch. If consumers reduce spending, it signals bad times ahead, he said.
That is not happening, though.
Last year, for example, eight million homeowners refinanced their mortgages, for an average monthly payment reduction of $110. Mr. Chimerine said these savings were promptly spent.