The sum of all vulnerabilities - the need for comprehensive reform in US economic policy-making

The US economy is now marked by some serious vulnerabilities. On the fiscal side, public debt keeps accumulating at an alarming pace and federal government fiscal deficits show no clear signs of decreasing. On the monetary side, Fed experimentation with exotic securities has set the stage for possible scenarios where the Fed's ability to control inflation is seriously constrained. On the structural side, US wage competitiveness lags behind many other countries in several sectors. Also, energy sustainability and energy independence are very difficult goals. And the real estate sector languishes. On the finance side, serious weaknesses still remain in the financial system, several years after the peak of the financial crisis associated with the Great Recession. On the trade side, Americans buy and consume much more of foreign goods and services than American goods and services bought by foreigners. On the investment side, levels of domestic investment are anemic. On the productivity side, there are serious doubts about meaningful improvements in productivity. On the employment side, unemployment is very high even though labor force participation has decreased. On the human welfare side, poverty levels are high by historical standards.

What is the US political establishment doing in response to this confluence of serious problems ? A country may be able to find ways to future prosperity and welfare without excessive difficulty when confronted by a few problems of this nature. However, when confronted by so many problems in so many critical areas, it is time for the policy makers to do some serious introspection about what has gone wrong, what policies may have led to this state of affairs, what kind of response is needed for future economic recovery etc. There is no sign that the politicians belonging to either of the two major political parties in the US are serious about recognizing the unprecedented nature of the vulnerabilities in the US economy. Economic policy, which should have a strong component of economic science in it ( impartial and objective economic science, if possible. Alas, objectivity, impartiality and unanimity are missing from many crucial areas of economic science. And there is a tendency towards conformity of a nature that favors elitist, inegalitarian and unstable outcomes ), seems to be influenced much more by political and hidebound ideological considerations than should be allowed in any mature economy or mature democratic system. Also, there is a rush to advertise inadequate partial measures as political success and as national success. There is a worrying tendency to give false reassurances to the public about the economic problems of the country. In an atmosphere where the public discourse tends to hide the seriousness of the challenges, the field becomes open for opportunistic politicians and myopic corporate interests to pursue their selfish agendas without hindrance. Since today's economic decisions will have lasting effects on the economy and since delays in implementing crucial policy changes will lead to a deterioration in one or more aspects of the economy, this lack of honesty has the potential to damage the strength and character, not only of the US economy, but also of the US democratic system.

by C. Jayant Praharaj ( send comments to cjpraharaj.blog@gmail.com )