I give the New York Times and its contributors credit for getting my blood flowing in the morning. http://tinyurl.com/munmbt is a blog entry by Casey B. Mulligan, an economics professor at U of Chicago, entitled: Forget a ‘Second’ Stimulus. Stop the First One! Having been concerned myself that the stimulus money may or may not be being spent in an optimal fashion, I have no doubt that government stimulus is required. When nobody is spending or investing, the federal government is the wallet of last resort. The wheels of the economy must be lubricated somehow. (Yes, I mix my metaphors while I’m having only my second cup of coffee.)
For an “economics professor”, the author does not appear to have been a student of history. Economic disasters like the current situation have always resulted in fear, caution, and reduced proactive economic activity. Does the author think FDR was misguided also?
The role of the federal government is to provide a structure in which individuals and the states can operate safely. The unholy alliance between capitalism and democracy during the Bush administration undid some of the legislation developed after earlier economic explosions. The Glass-Steagall Act doesn’t look so bad in hindsight, does it? The lack of prudent oversight of the country’s financial institutions, the same ones that contributed to that administration’s election, has resulted in worldwide disaster.
The economic system is a complex engine and the current problems must be addressed on several levels. The recovery will not be quick. Recovery depends upon creating jobs and moving income to middle and lower level Americans who have lost jobs to offshore locations or because of the fiscal crisis; encouraging education and research that will build the next big set of economic opportunities over time; and removing Bush’s war from eating away at the nation’s wealth.
The next Nobel prize in economics is likely to be awarded for thinking which is the opposite of Milton Freidman’s trickle-down economics. It will focus not on a waterfall from the wealthy enriching the earth below (which never did work), but on a fiscal osmosis providing a more even distribution of wealth throughout the nation and the world. Greed and leverage have always been the problems. We can’t eliminate the one, but we can legislate against the other.
Barney Frank and Paul Krugman are the guiding economic lights for this country at the moment. Speaking of which, if you want to read a real economics professor, take a look at Krugman’s blog http://tinyurl.com/23qv5r