But Simon Johnson definitely is and he makes some great points about the growth crisis and consolidation of power. And for Gannon, it also has some suggestions for innovation.
Growth Crisis
Instead, our crisis has two dimensions. First, we have a growth crisis. My MIT colleague, Daron Acemoglu, in a blog post on the Harvard Business Review website, makes the point vividly. In his view, one percentage point extra growth per year for the next 20 years would fix the U.S.’s budget problems. If we could manage to increase our growth rate from 2 percent a year to, say, 3 percent over the long haul, that would greatly boost average incomes, as well as tax revenue.
Acemoglu also argues that the U.S. economy can grow through innovation, but only if U.S. policies foster more basic scientific research and more effective commercialization of technology. The U.S. also needs to improve its patent system and allow more skilled foreign workers into the country, Acemoglu says.
The general policy mood may be shifting in this direction. Jeb Bush, the former Florida governor, and Kevin Warsh, a former Federal Reserve governor, made similar points in a Wall Street Journal op-ed last week. Bush’s rhetoric was suitably vague for someone who is likely to run for president in 2016. Bush and Warsh felt the need to repeat the mantra of the day, “Cutting spending is essential,” and then quickly made the right point: “But we will never cut our way to prosperity.”
Income Distribution
Restoring growth is not easy because of a second, more debilitating element -- a paralyzing fight over the distribution of income, in which powerful people can block the government from doing anything sensible if that is against their narrow interest.
This dynamic can be seen in the debate over who will foot the bill for the 2008 financial crisis, which caused a deep recession that pushed up the federal government’s medium-term debt -- what we should expect by 2018 for example -- by about 50 percent of gross domestic product. (You can check the Congressional Budget Office numbers yourself; start with points 9 and 10 in my testimony to a July 13 joint hearing of the Senate Finance and House Ways and Means committees. The testimony was not refuted.)
Someone Pays
To control future debt levels, someone has to pay for that fiasco. But people in high-income brackets, working with various allies, have dug a brilliant defense against tax increases in the form of the Tea Party. Backed by 30 percent of the population, this group exploits the broad design of the U.S. Constitution, which gives well-organized minorities an effective veto power over major policy changes. The result is that, instead of letting President George W. Bush’s tax cuts for the rich expire, we are headed for deep spending cuts that disproportionately affect the less-well-off.
More generally, powerful lobbies have amassed great privilege in the political system, and they can’t be easily moved from their positions. For example, Jeb Bush and Warsh say, quite reasonably, “If banks are ‘too big to fail,’ they are too big. They must be allowed to succeed or fail on their own merit, without any hint of government support.” But there is precisely no chance that Congress, the Federal Reserve or the executive branch will end the subsidies that undergird big banks, and that keep them in business through essentially free insurance against downside risk. Watch Bank of America in the weeks ahead for the next demonstration of what it means to be too big to fail.
(Simon Johnson, who served as chief economist at the International Monetary Fund in 2007 and 2008, and is now a Massachusetts Institute of Technology professor and a senior fellow at the Peterson Institute for International Economics, is a Bloomberg View columnist. The opinions expressed are his own.)
http://www.bloomberg.com/news/2011-08-1 ... hnson.html" onclick="window.open(this.href);return false;
That's one thing I've bought a lot of and never taken back.