Are We There Yet?

This article, from The Economist, stresses the prevalence of America's economic recovery on the minds of the American people as we are about to go into the congressional mid-term elections in November.

Our unemployment still remains at about one out of every ten. The worst recession since 1930's ended a year ago but our GDP has only been growing at 1.6%.

However, whereas most articles I have read talk about how the economy is still failing, this article points out that although slow, the economy is recovering and worries that we will slump back into a recession are over exaggerated.
Unfortunately, most recessions in America's past have been because of tight monetary policy. Therefore, when the policy is relaxed, the economy bounces back. However, this recession was a fiscal crises.

They predict that because typically the period of debt reduction lasts 7 years, we will be OK again in 2014.


Their criticism is on the politicians who are reluctant to acknowledge that we are in it for the long haul. They suggest that most politicians are simply working on assigning blame instead of being realistic. Republicans claim that the recession was from 'big government' and proof that Obama;s stimulus plans did not work.

Democrats claim that the Wall Street excesses caused the problem and therefore high wage earners should be taxed heavier.


The overall suggestion to America is "medium-term tax reforms and spending cuts needed to get a grip on the budget, while leaving room to keep fiscal policy loose for the moment".
They also suggest extending all the Bush tax cuts until a later date when the economy will be strong enough to withstand a whole fiscal overhaul.
There was also an interesting suggestion that ties in with our discussion on unemployment - how helping workers mobility to get to new jobs would help lower the unemployment rate. The Professor's comment that right now many people cannot move to new jobs because they cannot sell their homes because of the state that the housing market is in. This was explicitly said in this article.
Also mentioned in class and suggested in this article are the pay roll tax cuts to help firms high more people.