Treating the Symptoms Not the Disease
Published in Süddeutsche Zeitung
(Germany) on 22 October 2012
by Moritz Koch (link to original)
(Germany) on 22 October 2012
by Moritz Koch (link to original)
Translated from
by Ron Argentati.
Edited by Lauren Gerken.
Recently, presidential candidate Obama’s position has changed. The unemployment rate has been going down and Americans are increasingly optimistic about a recovery. But neither President Obama nor his challenger, Mitt Romney, is willing to say that a new dawn is on the horizon. And rightly so.
Simple verbal imagery was Ronald Reagan's specialty. People still recall his 1984 winning re-election campaign slogan, “It's morning in America.” He claimed that the nation would soon be out of the recession, a message that really hit home with the people. Reagan won by a landslide.
However, for a long time, the confident approach remained out of the question for the incumbent Barack Obama. The army of unemployed was too large, government debt too high and the mood among the voters too dreary. But that has started to change over the past few months. As the unemployment rate has declined, Americans have begun to have more confidence in the recovery.
And Obama, whose campaign had mainly consisted of warnings against a Romney administration, has begun to adopt the new slogan “Forward.” He now cries, “We’ve created 5 million jobs. Housing prices are rising again and stock market values have doubled.”* It is a glimmer of hope and perhaps the hint of a new dawn after the long, dark night of economic crisis. Still, neither Obama nor Romney dare to say that there is not a new dawn on the horizon, but a reawakening of the same old vices. The same old yesterday.
The American economy is stuck fast in dangerous old patterns. Before the recession, U.S. economic growth was dependent on consumer spending that was largely based on borrowing. In that respect, nothing has changed. Two-thirds of U.S. economic activity depends on consumer spending. Since the fateful year 2008, the share of consumption in the GDP has not fallen, but rather, has risen slightly. The nation is living beyond its means. This is evidenced by the trade imbalance: earning from exports is dwarfed by spending on imports. The imbalance that was partly to blame for America's economic woes has not changed.
The American way of life continues to be based on debt. Central banks in Asia and the Middle East that fear their currencies are becoming too strong are printing money and using it to buy U.S. treasuries, enabling Americans to continue living on credit. The problem is that America has squandered the money. Instead of investing in roads, schools and new technologies, it prefers to spend lavishly on new homes, shopping centers and fighter jets.
Americans Buy on Credit – Until the Bubble Bursts
As the nation stared into the chasm of a second Depression, White House chief of staff Rahm Emanuel commented that, "You never want a serious crisis to go to waste." Initially, it seemed that Obama was actually serious. His economic stimulus plan stabilized the economy, his finance reforms reined in Wall Street. But at the end of Obama's first term, the results were sobering. His administration had treated the symptoms but not cured the disease. Obama had made the correct diagnosis. He promised to strengthen the industrial sector and double U.S. exports by 2015, in order to get rid of the nation's dependence on domestic consumption. But the treatment was not rigorous enough. Exports returned to normal, but that was not nearly enough to herald the dawn of a brighter future.
Socially and Politically Divided
The crisis is based on the political divide in Washington and the social divide in the rest of the nation. The erosion of the middle class drives people further into debt and political gridlock prevents financial reform. Prior to the great crash, low interest rates and the deregulation of financial markets created the illusion of prosperity. Americans bought expensive homes on credit – until the bubble burst. And today? “Portfolio effects” are the goal of Federal Reserve chairman Ben Bernanke. Freshly printed money is intended to stimulate the stock market and the housing market, making people, once again, feel richer. That may work in the short term but it will be just like putting the train on the same old dangerous tracks.
2012 U.S. Presidential Election – With a Little Help from Famous Friends
Increasing production in the U.S. economy and creating well-paying manufacturing jobs will only be possible with real reform, not financial policy trickery. This is laborious and will take a great deal of time, but is worthwhile: the development of domestic energy sources could finally liberate the U.S. from its dependence on imported oil. Declining energy costs would motivate industries that fled the U.S. for Asian countries to return to the U.S. If Washington were capable of instituting real reform, then it could truly be morning in America once again.
* Editor's note: The original quotation, accurately translated, could not be verified.
Simple verbal imagery was Ronald Reagan's specialty. People still recall his 1984 winning re-election campaign slogan, “It's morning in America.” He claimed that the nation would soon be out of the recession, a message that really hit home with the people. Reagan won by a landslide.
However, for a long time, the confident approach remained out of the question for the incumbent Barack Obama. The army of unemployed was too large, government debt too high and the mood among the voters too dreary. But that has started to change over the past few months. As the unemployment rate has declined, Americans have begun to have more confidence in the recovery.
And Obama, whose campaign had mainly consisted of warnings against a Romney administration, has begun to adopt the new slogan “Forward.” He now cries, “We’ve created 5 million jobs. Housing prices are rising again and stock market values have doubled.”* It is a glimmer of hope and perhaps the hint of a new dawn after the long, dark night of economic crisis. Still, neither Obama nor Romney dare to say that there is not a new dawn on the horizon, but a reawakening of the same old vices. The same old yesterday.
The American economy is stuck fast in dangerous old patterns. Before the recession, U.S. economic growth was dependent on consumer spending that was largely based on borrowing. In that respect, nothing has changed. Two-thirds of U.S. economic activity depends on consumer spending. Since the fateful year 2008, the share of consumption in the GDP has not fallen, but rather, has risen slightly. The nation is living beyond its means. This is evidenced by the trade imbalance: earning from exports is dwarfed by spending on imports. The imbalance that was partly to blame for America's economic woes has not changed.
The American way of life continues to be based on debt. Central banks in Asia and the Middle East that fear their currencies are becoming too strong are printing money and using it to buy U.S. treasuries, enabling Americans to continue living on credit. The problem is that America has squandered the money. Instead of investing in roads, schools and new technologies, it prefers to spend lavishly on new homes, shopping centers and fighter jets.
Americans Buy on Credit – Until the Bubble Bursts
As the nation stared into the chasm of a second Depression, White House chief of staff Rahm Emanuel commented that, "You never want a serious crisis to go to waste." Initially, it seemed that Obama was actually serious. His economic stimulus plan stabilized the economy, his finance reforms reined in Wall Street. But at the end of Obama's first term, the results were sobering. His administration had treated the symptoms but not cured the disease. Obama had made the correct diagnosis. He promised to strengthen the industrial sector and double U.S. exports by 2015, in order to get rid of the nation's dependence on domestic consumption. But the treatment was not rigorous enough. Exports returned to normal, but that was not nearly enough to herald the dawn of a brighter future.
Socially and Politically Divided
The crisis is based on the political divide in Washington and the social divide in the rest of the nation. The erosion of the middle class drives people further into debt and political gridlock prevents financial reform. Prior to the great crash, low interest rates and the deregulation of financial markets created the illusion of prosperity. Americans bought expensive homes on credit – until the bubble burst. And today? “Portfolio effects” are the goal of Federal Reserve chairman Ben Bernanke. Freshly printed money is intended to stimulate the stock market and the housing market, making people, once again, feel richer. That may work in the short term but it will be just like putting the train on the same old dangerous tracks.
2012 U.S. Presidential Election – With a Little Help from Famous Friends
Increasing production in the U.S. economy and creating well-paying manufacturing jobs will only be possible with real reform, not financial policy trickery. This is laborious and will take a great deal of time, but is worthwhile: the development of domestic energy sources could finally liberate the U.S. from its dependence on imported oil. Declining energy costs would motivate industries that fled the U.S. for Asian countries to return to the U.S. If Washington were capable of instituting real reform, then it could truly be morning in America once again.
* Editor's note: The original quotation, accurately translated, could not be verified.
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