From here. Link from, I believe, a Marginal Revolution Assorted Links post.

All the blatant falsehoods are bolded (claims I could not verify as either true or false I left in normal text).

(((Robert Rubin))), co-chairman of the Council on Foreign Relations and secretary of the Treasury under Bill Clinton

Key to economic performance looking forward, both in the United States and globally, continues to be what I call secular policy stagnation. The economies of the major industrial democracies—the United States, the eurozone and Japan—all have political systems that are seriously dysfunctional, with varying issues when it comes to fiscal policy, structural reform and public investment. And monetary policy has done pretty much all it can; in fact, I think it may have tried to do too much.

There’s a real possibility that 2016 will be difficult for most major economies outside the United States, including significant uncertainties about China and important emerging market countries. Globally, there is a shortfall of economic demand relative to capacity, whatever the causes. There are eurozone estimates that project somewhat improved growth, but unemployment remains high, debt-to-GDP ratios remain unsound and growth predictions are still low, except for in Spain, where growth remains inadequate given its other problems.

For the United States, these conditions could feed a strong dollar and lessen external demand for American goods and services, dampening growth. Moreover, wage stagnation and income inequality are not only antithetical to our social values but continue to adversely affect growth. These conditions constrain domestic demand; deprive workers of the resources they need to access education, health care and other keys to productivity; and reduce support for growth-promoting policy. (Conversely, growth is essential—though not sufficient—to achieve widespread income increases on an ongoing basis.)

The fundamental question for the economic future of the United States and the other industrial democracies is political: Will elected leaders, primarily legislators, overcome secular policy stagnation and finally move forward on fiscal issues, public investment and structural reform, such as immigration reform and K-12 education in the United States and rigidities in the eurozone and Japan? Such action could make a real contribution in the short term—through the effects of policies themselves and through increased confidence—and is absolutely critical for the longer term.

(((Robert Reich))), Chancellor’s professor of public policy at the University of California at Berkeley and former U.S. secretary of labor

Economic forecasters exist to make astrologers look good, but I’ll hazard a guess: I expect the U.S. economy to sputter in 2016. That’s because the economy faces a deep structural problem: not enough demand for all the goods and services it’s capable of producing.

American consumers account for almost 70 percent of economic activity, but they won’t have enough purchasing power in 2016 to keep the economy going on more than two cylinders. Consider: The median wage is 4 percent below what it was in 2000, adjusted for inflation. The median wage of young people, even those with college degrees, is also dropping, adjusted for inflation. That means a continued slowdown in the rate of family formation—more young people living at home and deferring marriage and children.

At the same time, the labor participation rate—the percentage of Americans of working age who have jobs—remains near a 40-year low. The giant boomer generation won’t take up the slack. Boomers haven’t saved nearly enough for retirement, so they’re being forced to cut back expenditures. Exports won’t make up for this deficiency in demand. To the contrary, Europe remains in or close to recession, China’s growth is slowing dramatically, Japan is still on its back, and most developing countries are in the doldrums. Business investment won’t save the day, either. Without enough customers, businesses are not going to step up investment. Add in uncertainties about the future—including who will become president, the makeup of the next Congress and even the possibilities of domestic terrorism—and I wouldn’t be surprised if business investment declined in 2016.

I’d feel more optimistic if I thought government was ready to spring into action to stimulate demand, but the opposite is true. The Federal Reserve has started to raise interest rates—spooked by an inflationary ghost that shows no sign of appearing. And Congress, notwithstanding its end-of-year tax-cutting binge, is still in the thralls of austerity economics.

Chances are, therefore, the next president will inherit an economy teetering on the edge of recession.

Meanwhile, Scott Sumner‘s contribution in that section is short, sweet, punchy, and correct.

BTW, I did not bother to decisively confirm Reich’s Judaism until today. But his Wikipedia entry (parents “owned a women’s clothing store”, Reich befriended some dude with a Germanic surname killed by the KKK), as well as his affiliation with the Democratic Party certainly set off my Jewdar, leading me to this Jewish Virtual Library entry, which seems to have sealed the deal.

Advertisements