Read All About It

August 11th, 2011 at 8:43 am

I’m sitting here with a strong cup of coffee perusing the terrible headlines in the WaPo—here’s everything above the fold:

U.S., European Markets Plunge Again

An alarm bell for an America in decline?

Confidence in government is crushed after debt crisis [with an amazing graph showing a 45% decline]

Democrats, nervous about 2012, want Obama to be bolder

[then there’s this little forward-looking item:] Asian markets retreat: …Thursday morning session down nearly 1.3%…

How did we get into this mess and how do we get out?  Those are big questions for a man who is only partially caffeinated.  But here are some thoughts:

–Politics and politicians matter: If you elect people who believe the government does not work, that government is always the problem, never part of the solution, they will work tirelessly to make their beliefs come true.  A 45% decline in confidence in gov’t is a badge of honor to them, corroborating their ideology.

–The “America in Decline” theme doesn’t resonate with me, but we’re going through as wrenching a period as I can remember.  Much of the recent damage is self-inflicted but over the longer term, as negative trends—income stagnation, inequality, weak job growth–took hold, policy makers have mostly watched from the sidelines mumbling about self-correcting markets and market forces and market blah-blah-blah.

–Dealing with the structural, i.e., longer term, problems like inequality, globalization, the quality of jobs, retirement security, and sustainable health care is truly challenging.  There are often no known or obvious answers.  You have to try different ideas, like research on cost effectiveness in health care, pro-manufacturing policy re globalization, better labor standards (e.g., higher minimum wages) and education policy to push back on income inequality and wealth immobility.

But solutions for the cyclical downturn in which we’re currently and intractably enmeshed in are known, obvious, and becoming more so every day.  Paul Krugman not only writes about them tirelessly, but he and a few others, myself included, have pretty much been describing how things are going to unfold if we keep getting this wrong (economy stuck in neutral, high joblessness, little job growth, low interest rates, weak core inflation, too little investment).  That should be a very convincing sign that we are right.

Obviously, there’s a lot of noise pushing the other way, but it’s no wonder that “confidence in government is crushed” when policy makers fail to pursue known solutions at best and aggressively push the other way, toward recession-prolonging austerity, at worst.


How do we get out of this downward spiral?  That’s the theme of pieces I’m writing for the Atlantic, the next one of which is forthcoming.

Briefly, we flush out the bad ideas pervading our policy process.

We replace them with ideas based on the recognition of market failures—failures that are much more pervasive than the current model is capable of identifying.

We back out and implement the policy measures implied by those new ideas, all of which will call for more activist, “bolder”—as the headline above puts it—measures from an adequately funded, efficient government that has the confidence of a lot more than 26% of the public.

We evaluate the results on the simple criterion that if the economy is not working for most of the people in it, it’s not working.  If GDP and productivity are growing, yet middle incomes are stagnant and poverty is rising, it’s not working.  If so, we start at the top of this list until we get it right.

Wow, that coffee’s really kicking in…I’d better get to the office and start working on that new paradigm!

Source: Washington Post

Print Friendly, PDF & Email

9 comments in reply to "Read All About It"

  1. azlib says:

    I like what you are saying as a fellow technocrat. I am hoping the recent market turmoil and flight to safety finally acts as a wake up call that we have a demand problem and a jobs problem and not a deficit problem. However, I am not optimistic. The right wing wurlitzer is large and reaches a broad audience. The effect is compounded by the timidity of most Dems in Congress and our media. When even NPR buys in to right wing economic talking points and mindlessly lets the propaganda be heard without critique, I am discouraged.

    At this point I think it is going to take a bottoms up effort to get us out of this malaise. Depending on Washington to do anything rational is pretty much hopeless at this point in time.

  2. Pat Walters says:

    Mr. Bernstein, I hope you have a direct line to the White House and are talking to the administration on a regular basis.

    The Republicans seem to have nothing to offer but “can’t do” doom and gloom — and their mantra of cut, cut, cut (taxes, regulations, spending)and “it’s Obama’s fault”. I have not heard one new idea so far from the entire group of candidates running for President.

  3. fausto412 says:

    I was over 30 when i finally said something like this…
    “Politics and politicians matter: If you elect people who believe that something does not work they will prove you right every time”

    Too bad the tea party came around proved that if the electorate is full of idiots they will elect idiots who will provide idiotic results for said idiots to get mad about.

  4. dougR says:

    The only way any of the idiocy in Washington makes any sense is if you internalize a simple point: THEY DON’T CARE ABOUT ANY OF US. Then, everything they’re doing makes absolute, perfect sense: preservation of wealth at all costs, hewing to bad ideas repeatedly (because evidently, for the rich, they work), decimating the size of government to short-circuit future claims on rich peoples’ wealth, ignoring (as Obama’s campaign advisors have evidently decided to do) the most pressing needs of the American people since the Great Depression and purveying happy-talk instead, setting up an extra-Constitutional gang of rich peoples’ errand-boys to loot the country further while exempting (they hope) our elected representatives from blame for it…well, I could go on. I mean, NEITHER party is working for the American people at this point.

    I think it’s time someone constructed a formal economic model that expresses what the true economic goals in Washington are: preservation of capital for those who have it, shrugging off as collateral damage the millions of destroyed lives they once had a moral obligation to care about, but now evidently no longer do. I’m afraid investing any hope or assumption of “good intentions” in Obama or his advisors is utterly delusional. They do not wish us well in any way that means anything.

    I don’t know what’s with all these people in nice suits you spend time talking to, but to me they’re monsters. Certainly, organize locally, demonstrate, support (financially and otherwise) for local candidates you can trust, and organizations that have proven themselves. But it’s time to stop wondering why elites are adopting “bad ideas” in Washington and around the world, as if plunging economies into a depression is a “bug.” To these people, it’s a feature.

  5. CEK says:

    America is in a long-term decline relative to other countries. This started in the Bush administration with its huge additions to the deficit. Paying off the money he borrowed with the Republican Congress’s support requires money we otherwise could have been spending right now on so many things we badly need.

    The radical right is making sure we do not reverse that decline.

  6. perplexed says:

    I don’t know what’s in that coffee Dr. Bernstein but the next cup is on me! Just don’t forget that the economic choices are being constrained by political realities that circumvent the controls our democracy should be providing.

    Heard about a new site on Colbert last night,, that might be of some help in returning power to the people who are supposed to have it instead of those that buy it! The over-representation of a wealthy minority in our government must be stopped if the government is regain the public confidence and do what the people of this country need it to. Lobbyists should be attempting to convince voters, not directly interfering with the voters representatives. A two party system that allows big money to pre-screen and then promote the candidate choices available to the rest of us simply dis-enfranchises too many.

    • angloraven says:

      Opinions have been expressed that Americans Elect will turn out to be fraudulent in some way. The organization’s objective is to present voters with a presidential and vice presidential nominee unbeholden to either the Democratic or Republican party. It’s very simple. When voters are presented with the choice of voting for the Republican or Democratic nominees or the Americans Elect nominees (and presumably others), they make their choice. Where’s the fraud or scam? If a voter doesn’t care for the Americans Elect nominees, don’t vote for them. As a supporter of Americans Elect I hope that it will nominate candidates who will overwhelmingly appeal to moderate, independent and liberal voters and knock the socks off the two-party system.

  7. EuropeanObserver says:

    As a European, I am curious to see what the 2012 elections will give, and those of 2014 (mid-term)!
    Moreover there are those reports of trying to reduce the electorate base by requiring the voters to register with not existing registration card with ID photographs…

    We are used to have government issued ID cards, so for us this is no problem!

  8. janinsanfran says:

    Solutions can’t be solely technocratic. Yes, we (via every sane economist around) probably do know what needs to be done to stimulate demand and grow the pie. As for fixing the imbalances, the inequality, the insane health costs, you are probably right we could learn by experimenting.

    But all of this has to be explained, patiently and repeatedly, to the citizens. We don’t have trusted media or trusted figures to do this. But if it is not accomplished concurrently with the experiments, technocratic solutions will be derailed as “undemocratic.” And the complaint will not be false.