Tag: supply side
"Larry Summers and I were both on the side of 'we need a more definitive clean-up of the financial system.' And the question was if somebody, you know, really wasn't solvent, do you need the government to put in capital, realize the losses, clean it up, and then put it back into private hands?" - Christina Romer, White House Economic Advisor 2009 - 2010
Any serious study of this administration's policies reveals a most pragmatic response by Obama at almost every turn. From the selection of Treasury Secretary Tim Geithner and many other establishment appointees, to the decision not to seize or take the banks to the woodshed, Obama has erred on the side of caution and market reassurance rather than a confrontation with forces that would flirt with a stalemate leading to economic stagnation or catastrophe. It is essential that the story be told clearly and that we rely on the accomplishments. That looks to be the approach the Obama campaign will employ based upon the message from the campaign thus far. The facts are more than embarrassing for the right's apologists.
There was a time not too long ago when data on inventories was a leading economic indicator. It isn't discussed a lot anymore. It really doesn't portend so much for the American economy today. In those good old days, low inventories meant that orders were on the horizon and that meant firing up production in the United States, putting the un- and under-employed back to work. That was when the products being sold at retail were substantially domestically produced. Today, low inventories in the United States are good news overseas. The lag in and the magnitude of a response to economic stimuli have been compromised by globalization.
This means that if we want to have anything to show for all these deficits, after all the crying is over, we had best direct the spending toward something enduring, like infrastructure; something that puts the most Americans back on payrolls paying taxes. If we want to rely on supply side side-effects to revive the economy, just be aware that our supply side is turning into service at the retail counter. If supply side voodoo worked, it would be working in China and elsewhere and a lag would follow before it had any impact here.