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The solution to fixing the U.S. economy? Not what we've been doing. [Most commented]

August 15, 2011 |  2:06 pm

President Obama
Backers of the 2009 economic stimulus package assumed, based on the post-World War II experience, that the economy would turn around in short order with a bit of help from government. But although theirs was the consensus view, it was wrong –- as the consensus view always is in a deep crisis, James Galbraith, who teaches at the University of Texas at Austin, wrote in an op-ed Monday.

What the Obama administration should have done was prepare the nation for the worst possible circumstance, Galbraith wrote, rather than the assumption that the Great Recession would end just like all other recessions have. Pouring money on a broken economic system won’t fix it -– a stimulus alone was never going to work, Galbraith wrote. Our financial system needs to be rebuilt, but that fact was overlooked when the administration designed its solution.

Federal budget deficits in this situation are like IV-bags in an emergency room: they stabilize things. IV's are definitely linked to sickness, and no one would use them if they weren't necessary. But very few doctors propose to cut back on saline while the patient is still sick. Today, however, the official economists and their followers in Congress, the White House and the media are divided between those who would remove the IV's slowly, whether the patient recovers or not, and those who'd like to charge through the wards, yanking needles from arms. The debt deal enacted earlier this month put the first group in charge, but that's pretty cold comfort.

The solution is not another "stimulus" — a term that stinks of needles and quick fixes. The solution has to be a long-term strategy: both a new direction for economic activity and new institutions to provide the money. The proposed national infrastructure bank — a permanent institution — is the right sort of thing and would be a good place to start.

To go further, let's admit that our problem is not budget deficits or public debt — not now and not later. Let's agree that cutting Social Security and Medicare — inflicting pointless pain on the elderly — will not help. Let's build a new financial system to serve public purpose and private business. And let's start to act on our actual needs and problems: jobs, foreclosures, public investments, energy security and climate change.

The economy seems almost as shaky today as it was right after the recession officially ended in 2009. Many readers on the discussion board have given up on President Obama’s leadership.

Yes, Barack Obama and the Democrats have failed

As long as "we" refers to Barack Obama and the Democrats, the headline is correct.  It's just too bad it took the left-wing so long to admit what conservatives have been saying for years.

You cannot solve a debt and deficit problem by borrowing and spending more, nor can you support economic growth by increasing taxes, regulations and other government burdens.

The only rational solution is to radically reduce the size, scope, power and cost of government and restore maximum individual liberties and economic freedoms to the people.  

--candorman

What should we do to fix this?

A very long column with exactly ZERO suggestions of what to do, only that we must do something different.

--ridgeley

Stop blaming Bush and the Republicans. This is the Democrats’ mess.

Times lead in - "Fixing the economy: We got it wrong"

There is no "we" got it wrong.  Democrats of the 110th Congress held the House and Senate Bush's last two years.  They held onto both with the 111th Congress when Obama was elected.  They ran ALL of government for two full years.  Pelosi bragged that the 111th Congress was the most productive in the last 70 years.  She got the "volume" correct, and President Obama signed all their legislation and funding, adding more debt by raw dollars and percentage than any Presidential / Congressional team in U.S. history (over $3.7 trillion).  The legislation and funding are proof of what they did, and we all know now what an utter failure there was by this "team."

No blaming Republicans or Bush anymore.  It's all on record signed, sealed, and delivered by Reid, Pelosi and Obama.

Yes Times....there is no "we" that got it wrong.....it is the the 111th Congress and a President with extremist Progressive legislation and funding.

What ever happened to old time investigative reporters?  Now all we have are "spinners."

--tommythek50

The collapse happened on G.W. Bush’s watch, in response to tommythek50

You conveniently overlook the role that the G.W. Bush administration had in the collapse of the economy. The collapse happened on his watch. Not only that he ran up 6 trillion in new debt on pointless wars and tax cuts for millionaires. 

--clearville2

It’s time to look at free trade and reevaluate our national policies

Dr. Galbraith is correct that we have not yet even begun to look at the financial sector of our economy. We are going down the same road as Japan did years and years ago and to date Japan has not emerged from its problems. If you want to know how to deal with the financial sector, one should simply look to the north and copy what Canada did in the mid-1990s. 

Second, one needs to take a hard look at areas that have not even been mentioned. If you want to revive the economy, you need to see where jobs will re-appear from. To steal a line from the Boss, these jobs are gone and they are not coming back. We need to move away from a free trade model to a mercantalist model to run our economy. The time has come to look at free trade agreements, the WTO, and all the rest as ideas that belong in the ashcan of history and adopt policies that encourage things be made in this country. Given the fact that in manufacturing anything the typical cost of labor is somewhere between 8 and 10  percent, this could quite easily be done.

Finally, the time has come to realize that our economic policy, our trade policy, or tax code, and so forth is written by special interests and simply throw special interest out by electing pols that will rep us and not them.

-- jeff1947

Insightful, but what’s the solution for a polarized government?

Quite insightful, from an economic standpoint.  Trouble is, even if one is absolutely dead right about what should be done, there appears to be a tad more involved in actually pushing those policies through. 

If someone would tell us exactly what needs to be done, and then TELL US EXACTLY HOW TO MAKE THAT HAPPEN, especially in a world where a President actually takes the advice from the opposing side, only to have them turn against it, simply because he now favors their plan, that would be a really nice.

-AlOliver

*Spelling errors in the above comments were corrected.

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 --Samantha Schaefer

Photo: President Obama listens to a question from the crowd during a town-hall meeting at the first stop of a three-day bus tour of Minnesota, Iowa and Illinois in Cannon Falls, Minn. Credit: Craig Lassig/EPA

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