The Vital Center
As they have with the Great Depression, economic historians will argue for decades about the origins of our current crisis. But, surely, we can agree that the failure of international economic cooperation in the early 1930s—and worse, the sequential adoption of beggar-thy-neighbor domestic policies—made matters worse at a time when enlightened statesmanship could have made them better for everyone. Similarly, the current crisis is not just a U.S. problem or a European problem; it is a global problem that requires a coordinated global response.
Having spent some time inside the White House, I have some sense of how the world looks and feels from that unique vantage point. Its denizens always have a sense of operating under enormous pressure, subject to myriad constraints. When criticized, White House officials typically respond that they have done the best they could in the circumstances, and that if their critics had been in their shoes, they would have done the same thing. The more outside observers focus on the immediate situation, the more they will tend to agree with the assessment of the White House.
Raising the debt ceiling is a man-made crisis amenable to straightforward policy remedies. Political will is all that is lacking. Not so the economic crisis that our preoccupation with fiscal policy has temporarily obscured. Two major reports underscore both the depth of our economic woes and our increasing social divisions. The IMF recently conducted a comparative study of ten post-war economic recoveries seven quarters after the business cycle trough, or recession’s end. Its findings for the United States are stunning.
Over the past half-century, Ohio has been the quintessential bellwether state in presidential elections. That’s why the nascent Obama campaign should be paying careful attention to a Quinnipiac survey of the Buckeye state released this week, which shows the president with weak job approval numbers and an unimpressive lead over Mitt Romney.
Today, more the two years after the official start of the recovery, we find ourselves mired in slow growth and high unemployment. The majority of Americans cannot distinguish between this recovery and stagnation, if not continued recession. One question is why the economy is performing so much worse than in the previous post-recessionary periods since World War Two. And once we think we have an answer to that question, we have another: What is to be done? Economics is the obvious place to turn for answers.
Ever since it became clear that the pace of the economic recovery was falling short of expectations, two competing narratives have vied to dominate our politics. Movement conservatives argue that the weight of a government that “spends too much, taxes too much, and borrows too much” is suffocating the private sector and that new laws and regulations have throttled investment and job creation by creating uncertainty about the costs of doing business.
With Obama set to meet with congressional leaders from both parties on Thursday in the hopes of working out a deal to raise the debt ceiling, it’s a good time to step back from the details of the controversy and assess the bigger picture. My conclusion: We can’t get through the presidential election without addressing the fundamental issues facing the country and dividing the parties—the size of government, the level of taxation, and the future of Medicare and Medicaid.
In his press conference on Wednesday, President Obama insisted that revenues obtained from closing loopholes in the tax code must be part of a balanced deficit reduction package. Good for him, because real tax reform—that is, base broadening—tends to promote both efficiency and equity.
A man sits in prison, serving a life sentence after committing grave crimes against his country. Meanwhile, his aged father lies dying. The prisoner asks to be released for one day to say goodbye at his father’s bedside. The authorities say no; by some accounts, they do not even reply to his request. His father dies, and he asks to be released for one day to attend the funeral. Again, he is turned down, reportedly after high-level diplomatic consultations. This is, of course, Jonathan Pollard’s story. But I presented it anonymously because it shouldn’t matter whose story it is.
Jerusalem, Israel—I’ve spent the past week in Israel listening to as many voices as I could. Based on what I’ve heard, a rough summary of the situation is this: Benjamin Netanyahu offers no viable alternative to the status quo, and the opposition offers no viable alternative to Netanyahu. Until Mahmoud Abbas recognizes Israel as a Jewish state, the prime minister says, serious talks are impossible. And besides, negotiating with a coalition that includes Hamas is unthinkable.