For many years I enjoyed the fourth of July speeches of politicians. They generally talked about their plans but mainly what a great country this is. Now we have presidential candidates, primarily Donald Trump but also Bernie Sanders talk about what a deplorable situation we are in. Really?
We have the greatest economy in the world. We came out of the 2008 and 9 recession faster than any other OECD country. We have the greatest Armed Forces in the world even though we don't always use them thoughtfully. We have had six years of job creation and economic growth at about 2%. That is about average over a 100 year period. We do have a problem. That is the divergence between income and wealth twixt the top and bottom. Apart from any fairness or moral issues, this creates diminishing aggregate demand which inhibits growth. Our 500 Fortune companies are awash with cash but will not make capital expenditures or invest in research and development because they see no increase in demand on the horizon. The virtuous cycle is broken.
The two best ideas floating around are the bipartisan notion of earned income tax credits and the democratic proposals for a significant infrastructure spending program, and the creation of an infrastructure bank. The big political question is if Hillary Clinton is elected, will the House of Representatives continue to block infrastructure spending programs? It is virtually certain that the Republicans will control the house. Unless they abandoned their voodoo or fantasy economics, our economy will stagnate.
No comments:
Post a Comment