Economy

This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy.' Click here to read other contributions to the series. Here’s the policy reality facing the president: The economy is stuck in the mud and the American people are losing faith that policy makers can do anything about it. As long as GDP growth is persistently below trend—trend being around 2.5 percent—the unemployment rate won’t be going anywhere good anytime soon.

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This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy'. Click here to read other contributions to the series. Between the ugly political standoff in Congress over the debt ceiling and the wild fluctuations of the stock market, it has been a tumultuous last few months in the United States. The Eurozone countries, for their part, aren’t faring any better, facing an angry public, bailouts, and an uncertain future for monetary union. And yet, despite the gloom on Wall Street and elsewhere, many fundamental aspects of the U.S.

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This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy.' Click here to read other contributions to the series. If the notion that we are merely living through the aftereffects of a mere “recession” that ended in 2009 sounds somewhat ridiculous, that’s because it is. If we were being honest with ourselves, we would call this a depression.

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Perhaps the most remarkable aspect of America’s current economic crisis is its persistence. The problems that began in 2007 with the collapse of the sub-prime housing market—a market that few in the world had previously heard of—are still burdening us today. And it’s not yet clear whether our national economic stagnation, high-levels of unemployment, and rising political polarization are going to dissipate anytime soon. Considering the extraordinary nature of our economic situation, we’ve decided to go in search of extraordinary economic solutions.

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This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy'. Click here to read other contributions to the series. Various flashy stimulus packages—whether through the spending measures typically advocated by Democrats or the tax cuts regularly pushed by Republicans—remain a constant and tired refrain in our political debate. But if programs like George W. Bush’s 2001 tax cuts and Barack Obama’s Recovery Act tend to dominate the news, in the long run our living standards are determined by the compounded effect of productivity growth over decades.

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This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy'. Click here to read other contributions to the series. With millions of Americans out of work, a mounting federal debt, and the national economy at risk of a renewed recession, no one seems to be thinking about the Social Security system at the moment. But they should be. Fixing Social Security—that is to say, restoring the program’s actuarial balance—would serve our economic needs in a number of ways.

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This article is a contribution to 'Is There Anything That Can Be Done? A TNR Symposium On The Economy'. Click here to read other contributions to the series. One of the problems with the news cycle is that perennial issues—problems and solutions both—tend to get ignored in favor of things which have changed in the last few hours or days or weeks. As a result, when it comes to the global economic crisis now in its fourth year, one of the key potential solutions has been left all but ignored from the outset: making improvements to labor mobility.

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The Labor Department reported that the economy created 117,000 jobs in July and revised the prior months’ growth slightly to bring the average over the last three months to 72,000 jobs per month. This rate of job growth is below the 90,000 a month needed to keep pace with the growth of the labor force. Consistent with this fact, the employment to population ratio (EPOP) fell slightly to 58.1 percent, tying its previous low for the downturn.

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Last Sunday, legislators and the president, convinced that the United States was facing an imminent risk of default and their sound decisions were needed to wrest global well-being from the jaws of collapse, purportedly scrambled to announce a deal on the debt ceiling hours before the Asian markets opened. Instead of cheering the deal, however, global markets thumbed their nose and turned down within hours of the announcement.

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Economists believe that people respond to incentives. The fact that economists never suffer career consequences for failing to consider new ideas explains why they so rarely consider any policy that has not long been in the standard bag of tricks. I mention this background since it is relevant to the reaction given a proposal on the debt ceiling that Ron Paul originally put forward and that I subsequently endorsed. Paul suggested that the Fed could destroy the $1.6 trillion in government bonds that it now holds as a way of getting room under the debt ceiling.

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