Common sense: Is the USA Economy Growing at Needed Levels?

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drjohn11aDr. John Psarouthakis,
Executive Editor,
BusinessThinker.com
CV in Linkedin:
http://linkd.in/1AF7El7

Even the very imaginative L. Frank Baum could not have imagined in 1900, when he published his tale about a wizard in a land named Oz, how his book would resonate throughout the century. Now, as the United States struggles to find traction in the 21st Century, we seem—like Dorothy’s three Oz friends—to lack a heart, a brain, and courage.

The courage issue is not whether we will act but whether we will act currently and correctly. The heart problem will be solved when we realize that the risk of messing up our economy becomes high enough in becoming a second- or third-rate country is no route toward compassionate governance and widespread prosperity.

Given our courage and heart to advance as a society and as a nation, our steps must be smart. If we don’t use our brain this show will close in Act One, regardless how much bravery and compassion we muster.

Forgive me for starting off with old 20th Century business. This time I’ll avoid the ideology, barely touch politics, and focus rationally on issues that will be our 21st Century launch pad—or our Waterloo. Our sovereign debt, for example, hovers at GDP  or higher levels. Call that the Stagnation Line, a functional and apolitical description. To view this index in action as sustained drama, take a look at Greece.

A larger but less flamboyant script is to think back to the not at all distant past when Japan’s star was in such ascendance that some feared Tokyo would buy up all of America’s most coveted properties. Then Japan accepted a high debt-to-GDP ratio, and stagnation set in. No one worries these days about Japan or Germany or China buying and merging Disney, Coca- Cola, McDonald’s, the NFL, and Yellowstone Park.

Forget the politics. As a matter fact, can you even write a paragraph about Japanese politics? (Some of you can, I know; but you get my point.) Think of our challenge as setting off for a distant destination, but first you havie to move a fallen tree from the street right in front of your house.

Put 300 economists in a room for 150 days. Give them a podium, some audio/visual support, and half a day apiece to lecture about the Stagnation Line. Virtually all economists will say debt-to-GDP ratio matters, even in the United States.

There will of course be bickering about exactly where the Stagnation Line occurs, whether the ratio matters more in one nation than another, various nuances of one kind or an- other, just how to quantify such parameters, and all the other data squabbling in which economists engage.

One or two economists will scoff at any meaningful relationship between America’s irrational sovereign debt and its economic recovery. For their trouble, they are likely to be awarded a Nobel Prize. Among the rest of us, common sense must prevail.

The Stagnation Line does matter. We need to break away from it, get our economic engine working again, and move into this new global technological age. Agreement on that need and that agenda appear to be exceeded only by total lack of action to answer the need and meet the challenge.

Have you ever seen such a disconnect in public policy? I have not. It is an awesome thing. Three guys stand between two steel rails, which run in parallel along short wooden beams laid crosswise beneath the rails.

A vibration along the rail system can be felt, an oncoming whistle can be heard from just up the line. The three fellows confer and agree they hear a railroad train, it is coming their way, and its arrival will prove fatal to anyone standing between these two steel rails. Yet the three do not move, and do not even prepare to move. What is wrong with this scene? Maybe, if strong consensus exists everywhere except among the 535 lawmakers who get to decide the issue, it’s time for Washington outsiders (with a few sane insiders riding shotgun) to get this show on the road.

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