Bucholz: U.S. Will Skirt A Recession

The media may be full of doom-and-gloom stories about the state of the U.S. economy and predictions of a recession—or worse. But Todd Buchholz, economist and former White House director of economic policy, believes the U.S. will skirt a recession and says the current uncertain economic times offer opportunities for solution providers.

Buchholz, in an opening keynote speech at Everything Channel's 2008 VARBusiness 500 Conference this month, painted a more upbeat picture of the economy. "Don't pop the champagne. But don't believe the headlines that say we're going to have a Japanese-style depression for the next 10 or 20 years," he said.

Certainly these are turbulent times. "What's happened is the building blocks of the world economy [have] shifted around before our eyes," he said to more than 100 solution provider executives. "We live in an era of hyper-competition." But it's in such times of "economic shock waves" when businesses are focusing on their core competencies that solution providers' services are most needed, he added.

"You are in the business of bringing the value of technology to companies who are not in the business of technology," he said, adding that the outlook is "bright" for the channel. "It's recognized now that we need solutions."

Buchholz said he believes the U.S. economy, while undoubtedly in a slowdown, will avoid two quarters of negative GDP (gross domestic product), the classic definition of a recession. "I'm convinced we're not going to have any quarters of negative GDP," said Buchholz, whose books include "Market Shock" and "New Ideas From Dead CEOs."

Buchholz ticked off a number of reasons for optimism. Employment has held up better than in past recessions, he said, and manufacturers have maintained lean inventories. He also said most companies have much more cash on hand now than in the 1980-81, 1990-91 and 2001 recessions.

The economist also noted that exports are surging, spurred by the weaker dollar. "The export machine is keeping us going," he said. He cautioned that the weak dollar "is in danger of going too far," but expressed confidence that the next president will work to shore it up.

He also does not expect a return of the "stagflation" of the 1970s because organized labor is unable to demand the kind of wage hikes it did back then and worker productivity continues to improve—fueled in part by IT.

While there's been a lot of talk about opportunities for solution providers in such fast-growing economies like China and India, Buchholz urged solution providers to look closer to home and consider expanding into Latin America, mentioning Brazil in particular.

"These are chaotic times. These are the most complicated times I can remember as an economist," he said. "This is still the time for opportunity and this is still the time for innovation."

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