Liberals are wrong about the economy, and conservatives are wrong about the economy, Ramesh Ponnuru and David Beckworth write today in The New Republic.
Ramesh Ponnuru is wrong about the economy, and David Beckworth is wrong about the economy, Joe Weisenthal responds at Business Insider.
Here's a different perspective: Liberals, conservatives, Ponnuru, Beckworth, and Weisenthal are all right about the economy. Everybody agrees that little guys are the engine to economic growth. Liberals call them "folks", conservatives call them "small businesses", wonks call them "consumers." The point is, they aren't GE. There isn't one of them. There are millions of them, and until we get them going, it's slogcovery as far as the eye can see.
In their suprapartisan TNR column, Ponnuru and Beckworth find that liberals bash austerity and conservatives bash the Fed, but what the economy really needs is a little more of both. Conservative spending plus expansionary monetary policy would begin the work of deficit reduction while inflating away the burden of our debts. That's half wrong, Weisenthal responds, since the economy's pains principally come from a lack of demand. And a lack of demand principally comes from household debt. He writes:
Government debts and private debts mirror each other, so that when the government spends and goes further into debt, someone in the private sector is increasing their income and coming out of debt. It's pretty remarkable how perfectly the green and red lines mirror each other.
Note that there is a third source of income for the domestic private sector -- exports, the dotted line -- but at least in the medium term nobody has a good idea of how to juice exports enough to make a difference.
That bottom line is that it's the consumer, stupid. Without the middle class spending more money on stuff, nothing will get better quickly. Not hiring, not investment, not incomes, nothing. Instead, some things will get better slowly, like unemployment claims, and other things won't get better at all, like long-term unemployment. There are a couple of ways to get the middle class to spend more money on stuff: