“Innovations in information and communication technology starting in the 1960s have had a transformative impact on the world economy by creating a platform upon which myriad other technologies and products could be developed. Green technology has the potential to cut carbon emissions, sure, but we also need to transform the way in which energy is delivered, utilized, and monitored. This necessitates innovation and significant investment not only in power generation but also in the electricity grid, in the transport system, and in homes and factories. The United States is lagging behind other countries in these activities. To regain leadership, we need both more and smarter subsidies to research in green technologies and a carbon tax that naturally encourages the use of cleaner technologies and triggers more research to seek such technologies.”

— Daron Acemoglu’s case for economic growth as the cure for our debt and employment problems is compelling, particularly this recommendation. His mention of “leadership” in green technology is a bit misleading, though — investment won’t in itself give the US an edge against trade rivals like China or Germany, and the international process on climate change is so broken now that the US stands little chance of leading, even by example. But a renewed focus on infrastructure and making it more sustainable would be an unalloyed good.

(Source: blogs.hbr.org)

9:41 am  •  August 11, 2011  •  View comments

Michael Cohen:

America is increasingly moving toward a parliamentary system in which politicians, rather than voting along regional lines or in pursuit of parochial interests, cast their ballot solely based on whether there is a D or R next to their name. Such a system might work well in the UK, but in the US, with its institutional focus on checks and balances and the many tools available for stopping legislation, a parliamentary-style system is a recipe for inaction.

5:45 pm  •  August 10, 2011  •  View comments

As much as I’d like to see the White House unveil a comprehensive jobs and infrastructure plan, the Federal Reserve is now pretty much the only authority in Washington that is both willing and able to support economic recovery, making the Obama administration’s neglect in filling the two vacancies on the Board of Governors, even with recess appointments, all the more mystifying. But it does present an opportunity:

The truth is that liberals should treat the Fed the way they treat the Supreme Court, as one of the most important targets out there for organizing and political pressure. And if they push, this is one area where they probably could exert some real influence on Barack Obama — and, perhaps, on some policies that really matter.

2:33 pm  •  August 10, 2011  •  View comments

“This is the reality that liberals need to face: Much of the Republican “intransigence” and “hostage-taking” and “terrorism” that they deplore is a direct consequence of the fact that Republicans assume that Democrats will always, always, cave on taxes. And so long as that assumption keeps getting vindicated by events, there’s no incentive for the G.O.P. to accede to sweeping compromises on deficit reduction. Why would you compromise with a party that won’t actually fight for the revenues required to pay for the programs it claims to want to protect? Why would you sign off on tax increases that your notionally pro-government opposition doesn’t want to sign off on themselves?”

— Ross Douthat pretty much says it all.

(Source: The New York Times)

4:20 pm  •  August 8, 2011  •  View comments

I remarked a while back that cancelling debt as a way to spur economic recovery would be a radical solution that the financial sector, for one, wouldn’t stand for. So what does it say about the mess we’re in that conservative economist Carmen Reinhart¹ (via David Frum) is now all but recommending cancellation of at least some household debt?

“Until we deal head-on with the fact that some of those debts are not ever going to be repaid, we will continue to have this shadow” over growth, Reinhart said today in an interview on Bloomberg Television’s “Political Capital with Al Hunt,” airing this weekend.

She later admits that forgiving some debt and restructuring of others would be “kind of ugly,” which is an understatement. To begin with, recall that the Tea Party was born after the Obama administration announced an early effort to save homeowners from foreclosure, which prompted Rick Santelli’s now notorious rant about the “losers” that took out bad mortgages. For a lot of Americans, the idea that people might get help they don’t necessarily deserve, even if it would benefit the economy as a whole, is morally repugnant. This is just the hangover theory of recessions, as Paul Krugman put it back in the 1990s, but it’s this idea, I think, that has made it so hard to build support for tougher economic recovery actions. Some part of us wants to believe that we need to suffer, even if the suffering is to no purpose. Even otherwise well-meaning people, like the President, are essentially endorsing this view when they call for government tightening its belt, just like a family would during hard times. So long as this attitude remains prevalent, I doubt that support for debt cancellation will gain much traction.

On the other hand, another way to achieve the goal of relieving people of unsustainable debt loads is by undergoing a sustained, but temporary, bout of inflation. To be sure, it’s also controversial, but it has the virtue of avoiding the question of who is deserving of debt relief and who isn’t. Failing that, we could always bring back the tradition of Jubilee.

11:15 am  •  August 6, 2011  •  1 note  •  View comments

Bad economic data is all around us, but it’s this graph, showing the number of unemployed persons per job opening, that hits the hardest for me. Recovery is a long way off.

6:30 pm  •  August 5, 2011  •  View comments

A good rundown on both the pros and cons of using biofuels. My own take is that they’re probably a wash as far as climate change impact is concerned; in fact, their main benefit will likely be in bolstering energy security — i.e., cushioning the blow of rising oil prices — more than anything else.

5:28 pm  •  August 5, 2011  •  View comments