This was the second day of a conference organised by The Atlantic, the Aspen Institute and the Newseum.
David Leonhardt's interview with Alan Greenspan was interesting. (Megan McArdle's write-up is here, along with a video.) Greenspan emphasised the need for higher capital requirements in banking and finance. He was also asked to name the issue that we would one day come to see as today's biggest neglected economic-policy problem. Public debt, he said. Asked how we solve that problem, he said with higher taxes--they will be needed even if control of spending can be tightened--and a VAT would be the best way to raise them. He is right on all those counts, in my view. What's striking, though, is that as a matter of practical politics the conversation about restoring fiscal balance has not even started. In the end, of course, the country will have to confront this question. But when and how will the inevitable present itself? What kind of further crisis will it take to get this subject on the table?
In another session, political strategists Steve Schmidt and Bob Shrum discussed, among other things, the prospects for next year's elections. (See Marc Ambinder's write-up.) Whether and how far the Republicans make progress will depend on the strength of the recovery, they noted. If the economy surges back, the administration and the Democrats might do quite well, said Shrum. At the moment, most economists seem to be expecting a fairly tepid expansion, with unemployment still higher than 10 percent on election day--but not all. The column I mentioned in my previous post mentions a paper by Michael Mussa of the Peterson Institute. This argues, and quite persuasively, I think, that the recovery will be a lot stronger than that, with unemployment falling to less than 9 percent by the end of 2010. Democrats seeking uplift should read it.