By Steve Levy
Stimulus and the National EconomyUploaded: May 19, 2012
A reader asked what I thought of stimulus efforts for the national economy.
The economy still suffers from a lack of sufficient demand to more fully employ unemployed workers. Consumers for good reasons do not have the resources or inclination to borrow to support much higher rates of growth in consumption. While business investment and exports are rising, construction and government spending are restraining growth.
The Euorpean experience in my opinion indicates the folly of short-term aggressive austerity measures and I expect European countries will move somewhat away from austerity and toward stimulus. As a personal anecdote we just came back from Greece. A friend who worked for the Greek airline had his pension cut in half as part of the recent austerity. Without passing judgment on what happened, it is still true that cutting incomes for many Greek families will push the eocnomy toward recession, which is happening across many countries in Europe.
The tone of recent posts in Town Square reflects the tone of national debate and lack of compromise in moving the economy forward.
We have twin goals of stimulating growth and long-term deficit reduction and our politics seems incapable of sensible solutions.
Any stimulus should be directed to long-term goals such as infrastructure investment, federal support for R&D and facilitating access to higher education--with possible support for states facing education layoffs.
We will face tough choices at year end in meeting deficit reduction goals as we remain gridlocked in DC.