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Old assumptions equal a stagnant economy
Commentator David Frum.
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TEXT OF COMMENTARY
Kai Ryssdal: The soon-to-be former head of the White House Council of Economic Advisers gave a farewell speech this morning. Christine Romer leaves Friday to go back to Berkeley. Today, she said some pretty bold things about not worrying about deficits if you want to lower the unemployment rate. Things that are, generally, easier to say if you're on the way out.
In or out, commentator David Frum's not buying any of it.
David Frum:The administration's promise of a summer of recovery was delusional. Yes, some recovery can be glimpsed in the economic statistics. But an unemployed person's odds of finding work are barely better than when the Obama stimulus plan was adopted.
Supposedly, the recession ended last summer. Yet the percentage of adult Americans at work is lower now than it was six months ago. Businesses continue to shed jobs faster than they create them.
The risk that employment will decline further as the Obama Administration's fiscal stimulus ends is very real. Consumers are not spending, because they feel poor -- and getting poorer. They borrowed a lot of money in the 1990s and 2000s. Their equity in their homes has shrunk or disappeared.
These wretched figures should force us to rethink old assumptions. Each party's anti-recession ideas have been tested and have failed. The recession began when all the Bush tax cuts were fully in effect. And yet, it's suggested that re-enacting the tax cuts will somehow cure the crisis that those same tax cuts failed to prevent.
Meanwhile, job losses have continued all the time the Obama economic remedies were working through the system. The Obama fiscal stimulus added $800 billion to the debt, and still, we have not scraped ourselves off the floor.
The 2007-2008 economic collapse was a really, really big calamity. Yet, we have not taken that calamity's big lessons. Yes, we've tightened bank regulation a little. It will be tougher in the future for banks to bet 30 times their capital that uncredit-worthy borrowers will somehow find the money to repay huge loans. But the idea that home ownership is for everybody? That capital gains from housing will compensate ordinary Americans for stagnant wages? That we can raise living standards while importing a million low-wage workers every year?
On those fundamentals, Albert Einstein's old lament still holds: Everything has changed -- except our thinking.
Ryssdal: Commentator and former Bush Administration speechwriter David Frum is the editor of Frum Forum.
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I agree with the above, that this piece makes good points of what does not work. But as discouraging as most politician's slinging mud, there are no ideas of what will work. He fails to consider greater emphasis on technical education for global competetion, investment in our crumbling infrastructure, or other solutions that do not generate campaign sound bites or politicians do not have the guts to support. It's time we move from a nation of bemoaning problems, to become a nation of identifying the problems and investigating solutions that may require work and compromise.
Ok, here's a old idea that has not even been tried. LET THEM FAIL! That's right, force everyone who is bankrupt and hiding falsely valued assets on their books bring it out in the open. The light of day will truly clear this system. Until that happens, progress will be achingly slow. I defy anyone to find a good reason why this wouldn't work.
-rufus
This is specious. Sure, new ideas are great (and we need all we can get), but we’ve already had a lot of them, and because of one parties unified and uncompromising opposition to anything and everything, what does manage to make it through and get passed is so anemic, it’s impossible for them to have any real and meaningful effect. How can anyone be surprised we are where we are?
Mr. Frum is wrong on so many levels.
The previous administration dug us into a deep hole. Yet despite real progress, Frum contends the current administration has 'failed' because we haven't completely dug our way out yet.
And his assertion that maybe we need to give up on the idea that home ownership is best is odious. Do we need to give up the American dream to ensure that big banks can continue to pay out bonuses after they drive the economy into the ditch? I don't THINK so.
Dave,
Right on! I wonder however, whether the effects of the Bush Tax Cuts would have contributed to the economy differently if they had been spent differently by their recipients? Were they spent on what they were intended for? I believe the government's assumptions were that the people would use this money in their businesses to make them grow, higher more workers, invest in new capital assets, etc. Like so many home equity loans, home equity lines of credit and other 2nd mortgage instruments, they weren't spent on improving the real estate they were "funded" from, they were spent on consumables - jet skiis, vacations, anatomical enhancements, etc. At best, they were spent on education. Part of the falacy in the banking system was that all this money was spent on real estate and was reflected as such on their books. When people could no longer pay for their extravagant purchases, the housing crisis ensued.
Perhaps the new assumption needs to be that government should have more say into what your tax credits are used for.
Frum is right and wrong.
He is wrong when he suggests their is, or might be, linkage between the 2001 tax cuts and the current recession; NO, they are not related, pro or con.
He is right when he points out that we cannot expect a higher standard of living with a significant import of lower-wage jobs (although exporting of jobs thru trade deficits is a more important factor that lowers our standard of living).
So! Mr Frum believes that we need some new ideas! Ok! I am waiting to hear his new ideas! I have plenty of ideas, but none of them are magical enough to bring the economy back to those care- free days of 2005. The economy of 2005 was a fantasy economy fueled by tax cuts, and insane lending practices. Those days of excess are gone with the wind! We need to accept the fact that prosperity in the new economy is going to be relative(Einstein knew a little about relativity), with the average American having 30% less real income, but at the same time having the opportunity for a better quality of life. Having a vision of a better future in spite of the obatacles, is the solution, not lamenting the fantasy world of 20005, and it's McMansions and giant SUVs.
Former Bush speechwriter David Frum,s ideas regarding what it might take to reinvigorate the ecomony were somewhat helpful. But, for some reason Mr. Frum failed to mention outsourcing of American jobs to second and third world countries that pay subsistence wages as a problem facing America's economic recovery. Nor did he mention the World Trade Organization agreement that former President Bush signed with communist China in 2001 that gave unfair trade and tariff advantages to this oppressive, tolatarian state. How about offering some balance in your economic analysis and commentary? Populist ommentators like Daniel Schorr and Molly Ivans are sorely missed and badly needed in todays corporate controlled world.
"Everything has changed -- except our thinking."
Yes
hiring is up but those who lost jobs did not update skills yet...
car sales are better but we are still addicted to fossil fuel..
Lower middle class still belive they are upper middleclasss
We are still buying combo when we go for $menu.....
I don't understand why you let someone like Mr. Frum opine . . . he wants us to revert to failed policies of the last administration, and complains when the "loyal" opposition to Mr. Obama first dilutes the President's solution to retrieve the economy, then are all NAY, NAY, NAY when it comes time to vote. Well, Mr. Frum, enough of your sanctimonious, obsolete, failed blather.
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