Wednesday, June 09, 2010

Not a tune-up but an overhaul

A theme of many economic critics of President Obama is that he missed an opportunity presented by the financial crisis for systemic economic change. That’s putting it too timidly: they actually say he missed the moment for necessary economic transformation. Brad DeLong agrees with many that one result was that the Obama 2009 stimulus was too weak to really jumpstart the economy. The result is an economy stuck in the mud spinning its wheels but not really moving. These critics say Obama essentially trusts the old order and believes it only needs reform. But what if the 2008 credit crisis was actually the last warning of an economic system on the verge of going critical? Many forecast an indefinite period of unemployment and under-employment of 15-20%. Thus Mark Thoma asks, “Where are the good jobs to come from?”

We are very soon to reach the milestone of the federal debt equaling GDP. Can this ever be paid off or will there be a real or de facto (via inflation) US sovereign default? If the national credit card is maxed out, how can a stagnant economy produce the revenue to pay rising energy costs, provide equitable universal health care, keep up with education and training, give retirement benefits to an aging population, and maintain the largest military in the world? Here is a fine, compact piece from a previously unknown blogger showing how we got in this mess and what needs to happen to get us out of it. At the end he references a post by Yves Smith which shows how current efforts to “go green” will fall far short and need much more drastic applications.

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