The United States’ usual tools in fighting economic downturns, cuts to interest rates and taxes and increased federal spending, may not be of much use in the next recession.
Interest rates are near zero, the government is saddled with high levels of debt and faces growing budget deficits to cover programs like Medicare and Social Security, according to The Wall Street Journal. Budget cuts mean state and local governments, which had acted as economic buffers in the past, will be able to offer less protection.
However, few economists believe a U.S. recession is near. For the first time in nearly 10 years, Federal Reserve officials are discussing an increase in short-term interest rates. But that change, if it comes, will take place slowly.