Breaking the cycle
鈥ave we, as a nation, lost the ability to self-correct?
Any system, whether it鈥檚 biological, political, or economic, must be able to diagnose and fix its problems if it is to survive. I don鈥檛 mean to be gloomy or dramatic, but I鈥檓 wondering if our political/economic system is up to that task.
We face an economy growing at stall speed and a moribund job market. We鈥檙e stuck in vicious cycle where weak labor demand and ongoing deleveraging means constrained households are not spending. The lack of consumer demand signals to corporations that this isn鈥檛 the time to invest in America, so they鈥檙e investing into emerging, expanding economies, and doing very nicely for it (corporate have more than recovered from the downturn).
Our only hope of turning this around in the near term is aggressive monetary and fiscal policy, and I鈥檇 say especially the latter. The President, I believe, has a solid jobs plan lined up that he will announce next week (assuming everyone鈥檚 aligned their schedules鈥�).
Yet, the likelihood that his plan will clear the political bar it faces in the House of R鈥檚 [sic] is not high. I don鈥檛 want to be too pessimistic. I still think, for example, renewing the payroll tax holiday will clear the bar.
But my larger point is this: sure, we are facing extremely tough economic problems, but they are not insurmountable and the is that they would be amenable to policy intervention.
At least, they would be if we could break out of these policy handcuffs we keep putting on ourselves.
