The most significant speech coming out of Washington this month was not Glenn Beck's rally, one of President Obama's political rants, or John Boenher's suggestion that we cut spending back to 2008 levels and freeze taxes. It was outgoing Chairman of the President's Council of Economic Advisors Christina Romer's "valedictory" at the National Press Club. Her main points:
1. She had no idea how bad the economic collapse would be (thus Obama's famous 8% unemployment limit);
2. She still doesn't understand exactly why it was so bad;
3. The response to the collapse was inadequate;
4. She doesn't have much of an idea about how to fix things.
When Budget Director Peter Orszag resigned in July and later took issue with with Obama's tax policies, it suggested disagreement about details of the administration's plan. Romer makes it clear that - like Congress having no 2011 budget -THERE IS NO PLAN.
To the layman, it seems as if a big piece of our financial problem is failure to distinguish between shorter term cyclical problems and longer term structural problems. All of the "sound and fury" coming out of the Democrats for the past two years (aside from health care) has dealt with the cyclical problem - often making the structural problem worse. If Washington listened a bit to The Public, they would realize that The Public understands and wants long term solutions.
So, the cyclical problem: overbuilding in housing; excessive personal debt; irresponsible financial industry mismanagement; lax regulation. A few trillion dollars later we have deferred some of inevitable pain in housing, saved some banks and car companies, extended the dole for the unemployed, and funded every public works project that could be earmarked. Twenty or thirty years ago we could have afforded that and moved on - but there are bigger structural problems afoot in 2010 and THERE IS NO PLAN.
And a few thoughts on the long term problem:
-- We were living on debt for a couple of decades, consuming more than we produced as a society - we will not return to those levels of perceived wealth. Until we recognize that everybody isn't entitled to a McMansion, a place at the lake, and world travel, we cannot start to rebuild our foundation.
-- The productivity of the information technology revolution has hit in full force - much as the automation of agriculture and manufacturing did in the past. (We are still the world's largest manufacturer and third largest agricultural producer despite low manpower requirements.) The question for government is what to do about the workers that we do not need. Some logical answers - keep people in school longer; retire earlier; limit immigration of unskilled workers; shorten the work week; move back toward single wage earner families; increase services.
-- A balance of payments imbalance of 5 % of GDP is crazy. Fixing this - by establishing "ranges of appropriate balance" with our major trading partners - would help to fix the employment problem. The world knows that the balance of the past decade (not only with China) is not sustainable; our politicians favor short term gratification.
Paul Krugman's bizarre attack on Paul Ryan's "Roadmap for America's Future" is reflective of not only an ideological disagreement with its provisions, but also of a desire to avoid any clarity with The Public about where we are going. Many bought the "Hope and Change" schtick once; this time a more adult America needs a leader willing to discuss a plan.
See the full post at www.RightinSanFrancisco.com