Reporting from Washington — As Europe cuts spending and China again floods the globe with low-cost goods, Americans are once more being cast as the world's consumers of last resort.
With U.S. unemployment still near 10% and workers' incomes largely flat, that may be a prescription for fresh trouble.
Although Europe's debt crisis has quieted a bit and the economic rebound in the U.S. and other countries is projected to continue, sustained growth may depend on whether the global economy becomes more balanced, with trade deficits and debt loads shrinking.
One factor keeping the world out of balance, the Obama administration and many experts contend, has been China's policy of keeping the value of its currency artificially low, allowing the Asian giant to keep churning out exports.
In a surprise move Saturday praised by President Obama, Beijing said it would allow more flexibility in exchange rates. But the Chinese statement, which was light on details, suggested that any change would be gradual.
How fast the global economy can evolve will also turn on how much spending patterns change in the biggest economies, especially America's.
If U.S. consumers can abstain from a "shop till you drop" lifestyle, their savings rate will grow and their debt loads will shrink. Those trends could strengthen the country's long-term economic health but also could cause more short-term pain in the form of slower job and wage growth.
Conversely, if Americans revert to their free-spending ways, financed by credit cards and other forms of debt, the country faces the risk of more bubbles such as the ones in housing and finance whose rupture the world is still recovering from.
Many analysts see the U.S. already heading back down the free-spending path.
"Europe and Germany will pursue austerity. Asians will pursue exports. We will be the only buyer," warns Clyde Prestowitz, a former trade negotiator in the Reagan administration and author of a new book, "The Betrayal of American Prosperity."
After shrinking during the recession, the U.S. trade deficit has swelled in recent months and is expected to keep growing. That indicates that American consumers are again soaking up massive amounts of goods from Asia, Europe and elsewhere without a comparable increase in sales of U.S. products in the opposite direction.
Many economists have said such imbalances contributed to the financial crisis and the resulting deep worldwide recession.
Sharing that view, Obama has called for remaking the American economy so it produces, exports and saves more while borrowing and consuming less. He has pledged to double American exports in five years.
At the last summit of the Group of 20 countries in September, world leaders signed off on Obama's call for more balanced growth. As part of that goal, Obama urged the Chinese to change their policy of tightly controlling the value of their currency, the yuan.
By keeping the yuan's value low, Beijing helps keep Chinese products cheap compared with those made in other countries. Chinese exports to the U.S. and the rest of the world jumped nearly 50% last month from a year before, according to Chinese government statistics.
Obama praised as "constructive" the Chinese central bank's announcement Saturday that it will increase flexibility in the yuan-dollar exchange rate. But U.S. lawmakers and other critics of Beijing's policy — who contend that the yuan is at least 20% undervalued against the dollar — called the move insufficient.
The Chinese statement could help defuse tension next weekend, when the G-20 countries are scheduled to meet again in Toronto, but Prestowitz and other experts predict that the summit will end in stalemate.
A major reason is that the credit crisis in Europe has complicated Obama's goal of building a new global economic model based more on spending by consumers in countries other than the U.S.
The continent's debt problems have caused the dollar's value to rise against the euro and many other currencies, making U.S. products more expensive in Europe and elsewhere outside of China. That has helped efforts by Germany and its European neighbors to bolster their growth by exporting more.
The U.S. trade deficit with China, which totaled $227 billion for all of last year, widened in the first four months of this year compared with the same period in 2009. But America's trade deficits with Germany and Japan, the world's two other export powerhouses, grew even faster, as did the U.S. trade shortfall with oil-producing nations such as Saudi Arabia and Nigeria.
"I think we're back to our old ways," said Raghuram G. Rajan, a University of Chicago finance professor and author of the new book "Fault Lines: How Hidden Fractures Still Threaten the World Economy."
