David Wessel Joins the Hippies Who Have Been Calling for More Aggressive Economic Stimulus for... 2 3/4 Years Now
How to Get the U.S. Recovery Back on Track: The U.S. economy resembles a patient who survived a heart attack, and tells his doctor: "I took your advice, swallowed the pills and I still don't feel well." We were warned the post-recession recovery, now marking its second anniversary, would be painfully slow. It's worse than predicted. And it's hardly reassuring for Federal Reserve Chairman Ben Bernanke to concede: "We don't have a precise read on why this slower pace of growth is persisting." Although unemployment is at 9.1% and forecast to remain above 8% through next year, the Fed says it won't do more to help the economy. The adrenaline of fiscal stimulus is wearing off. And Washington is fixated on deficits and debt ceilings. Is there really nothing to be done to help the economy heal?
One set of physicians, the Keynesians, are sure their medicine worked, but the dosage was insufficient. They prescribe more stimulus.... Another set, influential among Republicans, is just as sure the medicine didn't work. They prescribe the opposite: Starve the fever—cut spending significantly and soon. A third set, influenced by professors Kenneth Rogoff and Carmen Reinhart's history of financial crises, says deleveraging is like detox: Painful, takes time and can't be rushed.
To be clear... the U.S. government needs to enact now a credible, long-term plan to reduce future budget deficits. Period. But that doesn't mean deficit reduction alone will unleash a surge of growth and hiring.
Remember: The worse the economy, the bigger the deficit.... References to "political reality" and reminders that "it could have been worse" aren't policy. If the president and Congress want to slip some growth-inducing remedies into the pending deficit deal, what should they examine with an unjaundiced eye?
Housing.... all. It's time for a rethink, in light of the persistently sour housing market. Perhaps state-owned enterprises Fannie Mae and Freddie Mae should be deployed more aggressively to refinance credit-worthy underwater borrowers....
Hiring. The cycle is clear: Consumers won't spend more because so many are out of work or worried about losing their jobs. But employers won't hire more at home because they're uncertain demand will be there.... Nudge employers to hire with a tax credit for every worker they add or extra dollar they spend on payrolls.... Watchful waiting is costly and cruel.
Confidence. The only sustainable way to get the economy moving is for business to invest and hire more.... Moving from rhetoric on exports to passing free-trade pacts would be a plus. So would a bipartisan deal on deficits. And so would appointing and confirming regulators for a growing list of vacancies. Suing Boeing over where it puts its plants doesn't help. But just because something will make executives feel better doesn't mean it's a good idea....
Infrastructure.... [T]he federal government can borrow at below 3%, construction workers are idle, and many U.S. roads, subways and airports seem Third World compared with China's new ones. How about a quick round of infrastructure maintenance....
When times are tough, resignation isn't usually the American way. Why should it be now?
Duncan Black wishes for some recognition that some of us have been on this case--although howling at the dead, uncaring stars, for all the good we have done--for 31 months now:
Eschaton: Shorter David Wessel: "The hippies are like so totally wrong about everything, but here's my plan in the WSJ to implement the hippie agenda." That's a bit of an unfair characterization, but I wish pundits could just say "here's what should be done" without pretending to float above everyone else who is wrong.