Economist: $100 for all

Here’s an idea for the flagging economy, courtesy of UCLA economics professor Ed Leamer: $100, in gift card form, for every American to spend by the end of the year.

It’s the kind of short-term cash infusion that kept the economy growing, however slightly, in the second quarter of the year. And it would give some pop to the current gloom, Leamer said in a conference call with journalists this afternoon.

“It would be enough just to elevate the mood of the country and keep us spending so that we don’t tip into a really severe recession,” said Leamer, director of UCLA’s Anderson Forecast.

Leamer argued that the economy is not as weak as the wave of fear on Wall Street last week would indicate, that, compared to past recessions, most measures of employment and production are still fairly bright.

The big risk of all the gloomy talk, Leamer said, is that consumers and businesses crouch into “a defensive posture” and stop spending.

“If that fear continues then we’re going to have a really bad couple or three quarters going forward,” he said. “We need to have our leaders in Washington and the media say it’s not nearly so bad.”

But we are likely in the middle of a “structural shift” in the economy, Leamer said, out of a phase in which U.S. consumers, fueled by credit from overseas, powered the global economy. It’s unclear what’s next, he said, but “the future isn’t what it used to be.”

That begs the question: If we’re in a structural shift away from consumerism, and yet we need consumers to keep spending if we hope to avoid a deep recession, are we doomed?

“What we want to do is have consumers be more responsible and increase their savings,” Leamer said. “But not all at once. If we do it in a nice, slow way, we can accomplish that structural adjustment without having a deep recession.”

Sounds like a tricky act to balance. Stay tuned.