Speaking at a health care reform rally in Raleigh, North Carolina, in July 2009, President Obama declared that the worst of the recession was over. â??We have stopped the free-fall. The market is up and the financial system is no longer on the verge of collapse,â? he said proudly.
A year or so later, with midterm elections looming and an electorate that is as fearful and angry as any in memory, the stock market has risen, but even a breath of bad news can send it tumbling. As dismal as housing prices continue to be, they have yet to hit bottom in some places. Unemployment remains frozen at an overall level of nine-plus percent, and job creation has been anemic. If the crisis belonged to George W. Bush, the recovery has been Obamaâ??sâ??and it has been a fragile and tentative one at best. Along with billions of dollars in stimulus payments, the president has spent down most of his political capital. So what is his next step?
That depends upon how serious Obama is about his legacyâ??whether he is looking to win votes for himself and his party in the short-term, or to lay the foundation for a durable new economic and social order that is only beginning to emerge but is required for sustained prosperity. The two goals are not mutually exclusive, but neither are they always compatible.
Let me say first that the bailouts and stimulus programs of the last two years were not a complete mistake. Economic policymakers donâ??t have the luxury of hindsight in the heat of a crisis; there is tremendous pressure on them to do something. It would have been suicidal not to give the banks the capital infusions they needed when the whole financial system was on the brink of meltdown or to refuse to help states avoid laying off thousands of teachers and police and other workers.
But now we find ourselves having the wrong debateâ??about whether a stimulus is needed or notâ??and we need to shift it. The fiscal and monetary fixes that have helped mature industrial economies like the United States get back on their feet since the Great Depression are not going to make the difference this time. Mortgage interest tax credits and massive highway investments are artifacts of our outmoded industrial age; in fact, our whole housing-auto complex is superannuated. As University of Chicago economist Raghuram Rajan wrote recently in the Financial Times: â??The bottom line in the current jobless recovery suggests the US has to take deep structural reforms to improve its supply side. The quality of its financial sector, its physical infrastructure, as well as its human capital, all need serious economic and politically difficult upgrades.â? Now weâ??re getting to the nub of the matter.
Where does tnr find these economic ignoramuses? Galston, Florida, and others. Long term fixes are needed. But for the short run, the US needs right now a short term, directed, Keynesian stimulus.. probably of $300-500B directed toward those areas that have immediate high multiplier effects. The areas are well known-- unemployment insurance, immediate job maintenance (to state employees), WPA/CCC type job creation, rebate of witholding taxes on the first $2-7K of monthly earnings, etc. We can debate how to build a better Titanic; right now, job 1 is to seal the damn hole.
Where does tnr find these economic ignoramuses? Galston, Florida, and others. Long term fixes are needed. But for the short run, the US needs right now a short term, directed, Keynesian stimulus.. probably of $300-500B directed toward those areas that have immediate high multiplier effects. The areas are well known-- unemployment insurance, immediate job maintenance (to state employees), WPA/CCC type job creation, rebate of witholding taxes on the first $2-7K of monthly earnings, etc. We can debate how to build a better Titanic; right now, job 1 is to seal the damn hole.
Where does tnr find these economic ignoramuses? Galston, Florida, and others. Long term fixes are needed. But for the short run, the US needs right now a short term, directed, Keynesian stimulus.. probably of $300-500B directed toward those areas that have immediate high multiplier effects. The areas are well known-- unemployment insurance, immediate job maintenance (to state employees), WPA/CCC type job creation, rebate of witholding taxes on the first $2-7K of monthly earnings, etc. We can debate how to build a better Titanic; right now, job 1 is to seal the damn hole.
Where does tnr find these economic ignoramuses? Galston, Florida, and others. Long term fixes are needed. But for the short run, the US needs right now a short term, directed, Keynesian stimulus.. probably of $300-500B directed toward those areas that have immediate high multiplier effects. The areas are well known-- unemployment insurance, immediate job maintenance (to state employees), WPA/CCC type job creation, rebate of witholding taxes on the first $2-7K of monthly earnings, etc. We can debate how to build a better Titanic; right now, job 1 is to seal the damn hole.
I gotta second drofnats here, including his opening sentence. This article is pretty much gibberish, and it is hard to know where to begin to make sense out of it because one can't make sense out of it. The bottom line is that demand will produce supply as long as the resources needed are able to flow. While we certainly have bottlenecks and constraints, including particularly infrastructure and education, right now we have excess capacity because of a lack of demand.
Nuts. I shouldn't bother. What drofnats said was to the point and quite sufficient. I can't add to it.
I gotta second drofnats here, including his opening sentence. This article is pretty much gibberish, and it is hard to know where to begin to make sense out of it because one can't make sense out of it. The bottom line is that demand will produce supply as long as the resources needed are able to flow. While we certainly have bottlenecks and constraints, including particularly infrastructure and education, right now we have excess capacity because of a lack of demand.
Nuts. I shouldn't bother. What drofnats said was to the point and quite sufficient. I can't add to it.
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