Ezra Klein (and Kevin Drum) have succinctly summed up my frustration with the present state of things in Washington, below. It is one thing, as Klein indicates, for us to face a crisis that could not have been anticipated, and for which there is no reasonable remedy.
But that is not the case here. The further decline in the American standard of living that we are about to face over the next decade (and which may occur in Europe too, for the same reasons) can only be attributed to political short-sightedness and economic illiteracy on the part of the GOP, and rank cowardice on the part of the Obama Administration.
At least Elizabeth Warren is running for the US Senate seat in Massachusetts. I know Warren a little bit -- she blurbed my book a few years back -- and she will speak truth to power.
Read all of it, from Ezra Klein today:
"Over the last month, the Dow has lost more than 1,500 points. That's, well, a lot. And it's not because a hedge fund blew up or an earthquake cracked California off into the Pacific or because esoteric trading algorithms went haywire. The stock market has suffered big losses because of real fears about the real economy: concerns that growth is grinding to a halt and that the American political system isn't trustworthy and that the Europeans can't get their act together and that austerity is going to start too soon and that the unemployed are simply going to remain that way. Concerns that we're facing, in Morgan Stanley'selegant phrase, a "policy-induced slowdown."
So there is plenty for Congress to do, and plenty that has happened in recent months to shock them into action. But they are not acting. There is no evidence that slowing growth, stagnant joblessness, or market turmoil has moved anyone on the Hill into thinking the economy needs even a whisper of added support. If anything, positions are hardening. House Majority Leader Eric Cantor sent his members a memo arguing they could help end policy uncertainty by “stopping the discussions of new stimulus spending.” This is what Morgan Stanley was worrying about when it worried that America might tip back into recession because of “an automatic tightening fiscal policy if, as our US team currently assumes, this year’s fiscal stimulus measures will expire.”
What should happen next is not that hard: Congress should pass legislation greatly increasing support for the economy now and reducing the deficit by about $4 trillion over the next 10 years ($3 trillion once you include the discretionary cuts in the debt deal). It's not rocket science, and it shouldn't be partisan. Ask ex-Reagan adviser Martin Feldstein, or ex-Bush Treasury Secretary Henry Paulson -- or read Jackie Calmes asking them -- and you'll hear the same thing. This is just standard economic theory. But Republicans in Washington are not going to apply it.
If this isn't driving you to despair, you're not paying attention. Unfortunately for him, Kevin Drum is paying attention: "Watching the world slide slowly back into recession without a fight, even though we know perfectly well how to prevent it, is just depressing beyond words. Our descendents will view the grasping politicians and cowardly bankers responsible for this about as uncomprehendingly as we now view the world leaders who cavalierly allowed World War I to unfold even though they could have stopped it at any time."
Good to have you back in the saddle Professor! (You're blog is on my reader so I don't miss a post :)
My problem with Ezra, although I often adopt his views in general, are that problems are not defined and the solutions too general. The cause of the crisis (a collapse of a financial ponzi scheme) is different from the reason we cannot escape from near recession and 20% underemployment (the enormous overhang of privately held debt). But the reasons we don't have solutions for these things I agree are political in that both parties are captured by the financial system. Ultimately the solution is regulation that prohibits Ponzi schemes, and reorganization of privately held debt (which means bank failures on a large scale). Sure the political hand wringing about public debt and stimulus play a role but are side acts to these 2 major problems which neither party will touch. They would rather the continued discussion about debt and stimulus.
For a historical comparison, re-read FDRs Fear Not inaguration speech(http://www.americanrhetoric.com/speeches/fdrfirstinaugural.html) - he calls for the removal of political power from the financial sector, which is what we need now more than anything.
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