Commentary

Old assumptions equal a stagnant economy

Marketplace Staff Sep 1, 2010
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Commentary

Old assumptions equal a stagnant economy

Marketplace Staff Sep 1, 2010
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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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