http://www.ft.com/...
Google this to get beyond the payscreen: "Romney would be a backward step"
Martin Wolf is an excellent columnist for a media source that can only be described as the go-to paper of international finance. Wolf takes a look here at the macroeconomics of the election, and what he underlines is not pretty. If Obama wins the election, we are looking at 4 years or more of a savings glut with many of the same problems we encountered over the last four years. He concludes that Romney's policies would make things invariably worse.
Reading the article makes you despair at our national ignorance of basic economics principles which seem to prefer the wrong medicine for the disease that ails us. A friend told me recently about high-powered investment advisors on Wall Street at a presentation b y right-wing economists, all of whom agreed with Wolf in the sense that austerity will only crater the economy more, and afterward my friend was disappointed but not shocked that the advisors' CNBC/FOX filters were not altered in the slightest. They didn't want to believe what the economists were telling them.
Pay close attention to Wolf's arguments on demand because any move by Obama to ratify the desires of the Catfood Commission is surely to lead the country to a huge recession and thereby discredit the only possible policies that can lead us out of the trap. A halfhearted attempt to right the ship may invariably lead to a GOP victory in 2016 that will bring disaster on the country.
He lays out two of the three challenges here:
The second challenge is supply. In the long run, the determinant of growth is rising productivity. The US is the most productive large economy in the world because it has been the best at developing and applying new technology. On this, two points need to be made. The first, as I noted in a column on October 2, is that productivity growth seems to be slowing, though it remains good by the standards of other high-income countries. The second is that in a world in which the connection between innovation and science is so close, much depends on government support for the latter. The US government has played a seminal role in innovation: the internet is just one example.
The third challenge is inequality. Here changes are profound (see chart). Apparently, 90 per cent of US income gains since the end of the recession have accrued to the top 1 per cent of the income distribution. As the Congressional Budget Office notes, “real (inflation-adjusted) mean household income, measured after government transfers and federal taxes, grew by 62 per cent between 1979 and 2007. Over the same period, real median after-tax household income grew by 35 per cent.” This divergence has two implications. First, changes in GDP fail to measure those in economic wellbeing across the population. They measure changes at the top, instead: since the top 20 per cent earns 60 per cent of market-based income and the top 1 per cent earns far more than the bottom 40 per cent, that is obvious. Second, to the extent that a child’s opportunity depends on the resources of its parents, the result will be cumulative disadvantage. The more important human capital is, the more powerful this must become.
We well know the third challenge because that's been the campaign's theme.
The second challenge is somewhat more subtle because the fact is, we need good investment, and even a capitalist like Wolf says that government DOES play a part in creating a good economy. The internet is one prime example.
The first challenge is the most daunting. There is a bundle of wealth being hoarded by the super rich the world over. This is related to challenge #3 but in a less obvious way, since it's the ideology of savings which contributes to rich superegos hoarding money. In other words, rich people are in thrall to their own greatness and are not likely to invest unless and until gov'ts provide the spark that cranks up those investment returns.
This means that as soon as Obama is elected, he needs to go over to Germany and kick some ass. Bush massaged Frau Merkel's back, but Obama needs to go over there and lay it all down. We need to rev the engines on both sides of the Atlantic so that American stimulus doesn't escape our shores.