So what should we make of Ayn Rand devotee Paul Ryan’s assumption of the mantle of resident intellectual of the Republican Party? Has Ryan’s predecessor, Newt Gingrich, gone full bore, frothing at the mouth, around the bend, bats in the belfry nuts with his sophomoric crusade against Islam? What is it with the fetishization of the center? Is the center really the font of wisdom self-styled centrists among the political class and punditerati would have it? Is it time to break with Barack Obama?

I have notes and some rough draft on these topics. The subjects strike me as interesting enough, and it reasonable to suppose that consideration of them would prove fruitful. My heart is not in it.

As I have nothing to offer, allow me to recommend Jeff Madrick, How Can the Economy Recover?, The New York Review of Books, 23 December 2010. Madrick is editor of Challenge Magazine, Senior Fellow at the Roosevelt Institute and the Schwartz Center for Economic Policy Analysis at the New School, and a regular contributor to The New York Review. His new book, Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present, will be published in the spring of 2011. The short answer to the question posed in the title is not by doing what we are most likely to be doing. Here is an excerpt:

Right now, the best hope is that heavy cuts in government expenditures will be postponed for two to three years. But such a delay will probably not be long enough. Erskine Bowles and Alan Simpson, the cochairmen of the fiscal commission President Obama appointed to propose ways of reducing the deficit, are calling for sharp cuts in spending but say they want to delay the first reductions until 2012, when the economy will have sufficiently emerged from the recession. This would be a severe miscalculation. Barring a surge in growth, the unemployment rate in 2012 will probably be at least 8 percent, roughly the highest level reached since the end of the recession of the early 1990s.

If this poorly considered advice is the best that this commission can give the President, the nation is in trouble. An obsession with taming the deficit, provoked by the rapid rise in the current deficit to $1.5 trillion for 2010, will make a large stimulus impossible. But the sharp surge in the deficit was mostly caused by the recession itself, which reduced tax revenues and raised the level of spending—such as unemployment payments—in response to the recession. President Obama’s stimulus package of $800 billion passed in early 2009 also added to the deficit, but that spending was only temporary and kept the economy from sinking further.1 According to a convincing economic model by the economists Alan Blinder and Mark Zandi, without the stimulus the deficit would have been substantially bigger in coming years.

If we presume that there will be an economic recovery, almost all of the projected deficit through 2020 will be the result of three factors: the recession, the tax cuts of the early 2000s under George W. Bush, and the hundreds of billions of dollars of war spending. In the 2020s and 2030s, however, projected increases in Medicare and Medicaid spending could raise deficits dramatically—and the amount of government debt and the interest paid on it could grow to alarming levels. Social Security spending will increase only modestly by comparison. But dealing with such long-term problems by abrupt cuts in spending now will likely consign the nation to a decade of slow growth, lost jobs, and low wages—and unnecessary, painful reductions in Social Security and other social programs that Americans value most.

What is rarely recognized is that even if the US can emerge from a weak economy within a few years, the economic foundation that existed before the cataclysm of 2007 and 2008 may not be adequate to restore the widely shared prosperity the US needs. For more than three decades, economic growth had been largely dependent on rapidly rising levels of debt and on two major speculative bubbles, first in high technology and dot-com stocks in the late 1990s, then in housing in the 2000s. What will now replace them?

:: Dec.18.2010 :: House Red: Politics & Current Affairs :: No Comments »