An important point from Noah Smith (no relation) — recessions accompanied by lower output and lower prices, as is currently the case, are invariably due to shortfalls in aggregate demand:
So it seems that the stories that conservatives tell about the recession - “policy uncertainty,” “recalculation,” or even a “negative shock to financial technology” - are not true. The stories that everyone else tells about the recession - “a flight to quality,” “increased demand for safe assets,” etc. - look much more like what basic introductory macroeconomics would predict.
This reminds me that many of the central factors behind the onset of the current downturn — e.g., unsustainable mortgage loads — haven’t really ever been resolved. The Obama administration’s main effort on this front, HAMP, failed pretty badly, and there hasn’t been any follow-up measure since. At this point, it’s really up to the Fed to get the recovery going again, so hopefully more people start calling on it to take action.
“There are really only two options here. (1) The Times is wrong. (2) The Times is right and America has the stupidest goddamn investors on the planet.”
— Kevin Drum on news that Wall Street is spooked at the prospect of federal budget cuts inducing a double-dip recession. With those fears apparently building up, perhaps it’s time to revisit the concept of government spending being good for the economy?
If too many Americans don’t believe in or understand what government does to help them, to offset recessions, to protect their security in retirement and in hard times, to maintain the infrastructure, to provide educational opportunities and health care decent enough to offset the disadvantages so many are born with…if those functions are unknown, underfunded, and/or carried out poorly, why should they care about how much this deal or the next one cuts?
Answering this sense of despair that many Americans have about their government should be the top priority for liberals, but it’s hard to do that if we’re preoccupied with reacting to the latest crisis.
Schmitt, as always, is worth listening to. I would add that, from what I understand of health policy, restraining growth in Medicare — where the real money is — entails getting a hold of health care spending in general. If Medicare reimbursement rates, say, start plummeting relative to private insurers, that will mean fewer hospitals taking Medicare patients at all. The problem, then, is that deficit reduction is a poor venue for reforming Medicare, where the question of private health spending is nonexistent.
Did you know that Fiona Apple’s older sister is a cabaret singer and that she made an album recreating a golden age radio program with Star Trek’s Brent Spiner? How much more awesome could I make that sentence?
