Don't like the economy? Do something!
Next week I鈥檓 headed over the UK where I鈥檒l be meeting with folks from the Resolution Foundation, a smart and innovative British think tank working on many of the same issues you see on these pages.聽 Here, for example, is a piece they鈥檝e just put out.
It鈥檚 a discussion about some of the economic challenges facing low and middle-income families in the UK, including stagnating real earnings, high household debt levels, and the likelihood that some supportive policies鈥攅arnings credits and minimum wage increases鈥攁re losing ground.
But the part I found particularly compelling is the policy discussion鈥攖he search for 鈥済ritty steps for improving household finances.鈥澛�
What I see when I look at today鈥檚 economic policy debate is a lot of people sitting on their hands.聽 Here in the US, only the most stalwart souls鈥攎ore on this in my next blog鈥攁re thinking about fiscal actions to create jobs.聽 Most have given up on the short term and the rest are scrumming around with the supercommittee, that leftover vestige from the great debt ceiling debacle. 聽Fannie and Freddie are doing a little (on refis and REO to rentals), but could be doing much more.聽
In Europe, central bankers at the ECB who could, with aggressive action, provide the necessary credit backstop to the banking system, are refusing to play the lender of last resort role that is the raison d鈥櫭猼re of central banks in moments exactly like this one.
In a way, Keynes鈥� fundamental insight was: Do Something!聽 The 鈥淕eneral Theory鈥� outlines in academic detail the rationale and conditions under which such interventions should occur, as well as the type of things we鈥檇 want to do鈥搒timulate demand through tempoary deficit spending鈥揵ut the core message is that when the market fails like this, sitting on hands doesn鈥檛 do anything but squander resources鈥攑otential growth is lost forever and, especially when the slog lasts this long, lifelong careers can be negatively altered.
So there you have it: Keynesianism and the policy roadmap forward in two words: Do Something!
