Once the Stimulus Kicks In, the Real Fight Begins

[elleng]

TWEAK OR TRANSFORM?
By Robert B. Reich

"The real stimulus debate hasn't even started yet. Congress will pass President Obama's stimulus package in the next two weeks, more or less as he wants it. The House has already done its part, and the Senate appears likely to follow suit. But when the economy starts to turn up again, perhaps as early as next year, the president will have the real tough decisions to make. He'll have to choose which spending will continue -- or whether any of it will continue at all. . .

Those who support the stimulus as a desperate measure to arrest the downward plunge in the business cycle might be called cyclists. Others, including me, see the stimulus as the first step toward addressing deep structural flaws in the economy. We are the structuralists. These two camps are united behind the current stimulus, but may not be for long. Cyclists blame the current crisis on a speculative bubble that threw the economy's self-regulating mechanisms out of whack. They say that we can avoid future downturns if the Fed pops bubbles earlier by raising interest rates when speculation heats up.

But structuralists see it very differently. The bursting of the housing bubble caused the current crisis, but the underlying problem began much earlier -- in the late 1970s, when median U.S. incomes began to stall. Because wages got hit then by the double-whammy of global competition and new technologies, the typical American family was able to maintain its living standard only if women went into the workforce in larger numbers, and later, only if everyone worked longer hours.">>>


http://www.washingtonpost.com/wp-dyn/content/article/2009/01/30/AR2009013003116.html

[GeorgeGist]

1. It seems obvious that the self-regulating mechanisms ...

have revealed profits to be a drain on the economy.

[Demeter]

2. Counting The Chickens Before the Eggs Are Even Laid

I can't believe Reich said that the economy would bounce back in a year....must rethink his reputation.