More stimulus. No, more spending cuts. No, fewer regulations. No—more stimulus! I hate to interrupt the compelling national debate over the relative merits of supply-side and Keynesian economics, but here’s what no one in Washington will admit: The debate is largely moot. No matter how many bridges and roads we rebuild, taxes we cut, or regulations we eliminate, the economy will be lousy. And it will stay that way for years to come. The primary reason we’re in this mess, David Wessel reminded us in The Wall Street Journal last week, is not any current government policy. It’s that Americans “went on a borrowing binge in the 2000s.” With interest rates near zero, and “irrational exuberance” driving up housing and stock prices, U.S. households took on $7 trillion in new debt between 2001 and 2007. And then the housing bubble popped, and the stock market had a coronary. Poof! Trillions in paper wealth vaporized. Americans are now in the process of “deleveraging”—paying off mountains of debt—but Wessel says that process is only “at halftime.”
We are not, in other words, in an ordinary economic cycle. We’re climbing out of an epic financial meltdown, unlike any since the Great Depression. Economists agree that consumer spending, hiring, and growth will be anemic for years to come, regardless of what Washington does. (Gov. Rick Perry’s “Texas Miracle” has produced an 8.4 percent unemployment rate, about 0.7 percent better than the awful national rate.) Admitting that, of course, would be a downer. The political theater in Washington, and in the Republican campaign, at least provides some diversion. Just don’t expect anyone to pull a rabbit, or 14 million jobs, out of a hat.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
-
Today's political cartoons - December 22, 2024Cartoons Sunday's cartoons - the long and short of it, trigger finger, and more
-
5 hilariously spirited cartoons about the spirit of ChristmasCartoons Artists take on excuses, pardons, and more
-
Inside the house of AssadThe Explainer Bashar al-Assad and his father, Hafez, ruled Syria for more than half a century but how did one family achieve and maintain power?
-
Editor's letterfeature
-
Editor's letter: Are college athletes employees?
feature The National Labor Relations Board's decision deeming scholarship players “employees” of Northwestern University has many worrying that college sports itself will soon be history.
-
Editor's letter
feature
-
Editor's letter: When a bot takes your job
feature Now that computers can write news stories, drive cars, and play chess, we’re all in trouble.
-
Editor's letter: Electronic cocoons
feature Smartphones have their upside, but city streets are now full of people walking with their heads down.
-
Editor's letter: The real cause of income inequality
feature When management and stockholders pocket all the profits, the middle class falls further behind.
-
Editor's letter: The real reason you’re so forgetful
feature When you consider how much junk we’ve stored in our brains, it’s no surprise we can’t remember our PINs.
-
Editor's letter: Ostentatious politicians
feature The McDonnells’ indictment for corruption speaks volumes about the company elected officials now keep.