Shaded areas refer to National Bureau of Economic Research recessions Source: US Federal Reserve

The US economy is likely to perform as poorly in this new decade, as the one that just ended, due to higher savings by more cautious Americans and a less qualified labour force, economists said on Sunday, at the annual meeting of the American Economic Association (AEA). Also at the meeting in Atlanta, Federal Reserve chairman, Ben Bernanke, said regulatory failure, not lax monetary policy, was responsible for the housing bubble and subsequent financial crisis of the last decade.

Prominent US economists said US gross domestic product (GDP) in the period 2009-2019, will grow close to the annual average of 1.9% seen between 1999 and 2009, economists said. That result was the the worst performance since the 1930s -  - the decade of the US Great Depression.

"It will be difficult to have a robust recovery while housing and commercial real estate are depressed," said Martin Feldstein, a Harvard University professor and chairman of President Reagan's Council of Economic Advisers.

The bursting of the housing bubble has resulted in median home values falling on average over 30 percent from their 2005 peaks.

Feldstein also warned that the economic recovery seen from the second half of 2009 has been driven by a government stimulus that will be fading in 2010.

“It’s easy to be dismal about the US economy,” said Dale Jorgenson of Harvard University, whose research focuses on on productivity. He sees a deterioration in the quality of the labour force causing productivity growth to fall to 1.5% a year this decade from 2% a year in the last 10 years.

Joseph Stiglitz, a Columbia University professor, who was a co-winner of the Nobel prize in economics in 2001, said that following a financial crisis that was partly a result of Americans spending beyond their means, the US savings rate could go markedly higher in the coming years.

“We’re not likely to have robust growth any time soon,”Stiglitz said.

In Atlanta on Saturday, he attacked fellow economists for building models that rely on rational behaviour when the financial crisis offers so much evidence of irrationality.

Stiglitz said the purpose of a financial system is "to manage risk and allocate capital at low transaction costs." What actually happened? "They misallocated capital. They created risk. And they did it at enormous transaction costs."

As for the bonus culture, Stiglitz said it's a myth that Wall Street is populated by the best and the brightest who deserve their big paydays. "When I look at the salaries some of our  'B' students got [on Wall Street], it doesn't correspond to their innate ability."

Both Stiglitz and Kenneth Rogoff, a Harvard University economist, warned that the large debt accumulated to counter the crisis will be a major headache for the US economy. They also cautioned there could be a new crisis down the road unless the US regulatory system is improved.

The Obama administration forecasts that the federal budget deficit will total more than $10 trillion through 2019, or about 6% of the decade's gross domestic product. Using those forecasts, Alan Auerbach, an economist at the University of California, Berkeley, estimates, by 2026 the US public debt will exceed 108.6% of GDP -- a record it set in 1946. In addition, the "trust funds" the government has set aside to pay Medicare and Social Security benefits will be exhausted in 2017 and 2037, respectively, after which a big portion of benefits will have to be paid from current taxes.

Economists say that to pay down its debts in the long term, the US government needs to cut spending or raise taxes by a total of as much as 9% of GDP.

In Atlanta, economists said China and India should continue to propel the world economy forward, which in turn would help the US

Feldstein said there could be a substantial improvement in net exports out of the U.S. “That’s where we could see a shift in aggregate demand, which could bring us back to full employment.” 

Asian economies are going to expand quite strongly over the next six to 12 months with China and India leading the pack, Khiem Do from Baring Asset Management told CNBC Thursday. Bob McKee from Independent Strategy joined the discussion: