Posted on Thursday, November 4, 2010
Pundits seem to agree that the anticipated Congressional deadlock won't help the economy. And yet they insist on proposing legislative solutions to the country's economic woes.
Reuter's Felix Salmon and the New York Times' Paul Krugman both take issue with a new column by Mohamed El-Erian, CEO of PIMCO, which runs the world's largest bond fund.
El-Erian starts by refuting the "conventional wisdom" that a stalled Congress helps the economy. Still, he argues, as others have argued, that the current economy can't be left alone, and he identifies a slew of problems, including the fact that Americans are still too deep in debt. But, Salmon and Krugman note, El-Erian is thin on solutions. Here's the offending paragraph:
Simply put, these realities make it necessary for Washington to resist two years of gridlock and policy paralysis. Democrats and Republicans must meet in the middle to implement policies to deal with debt overhangs and structural rigidities. The economy needs political courage that transcends expediency in favor of long-term solutions on issues including housing reform, medium-term budget rules, pro-growth tax reforms, investments in physical and technological infrastructure, job retraining, greater support for education and scientific research, and better nets to protect the most vulnerable segments of society.
Krugman sums up El-Erian concisely: "Simply Put, We Must, Um, Well." And Salmon points to a column by former car czar and recent target of an SEC investigation Steve Rattner, who offers a list of legislative "unfinished business" that would help the economy.
But as Salmon points out, these "wish lists" aren't realistic. "For all their exhortations, El-Erian and Rattner know full well that they're not going to get their wish lists -- and they know that they wouldn't have gotten their wishlists even if the Democrats had kept the house."
Even so, Salmon has some legislative proposals of his own, such as changing tax provisions that encourage businesses to borrow money. And even Krugman, who offers ostensibly non-legislative solutions, such as encouraging wealthy people to spend their money, admits that "there's no good mechanism in place to induce those who can spend more to do so."
What everyone -- including voters -- can agree on is that the economy is the nation's number one issue. If the economy does recover by 2012, analysts tell CNN, it could be enough to win President Obama a second term.
Of course, that's a big if.
Huffington Post William Alden