On Economic Choices and Political Outcomes

After two days of political prognostication and analysis, I turn my attention to matters economic.

The economy is in pretty dire shape — and has been since mid-2008. In President Obama’s first months in office, an economic stimulus bill was passed to inject some energy back into the economy. At the time, economists believed that the package was too small. Even Christina Romer, the outgoing chair of President Obama’s Council of Economic Advisers, believes that the economic stimulus passed eighteen months ago was insufficient.

The problem is that the economy is sputtering along. Explains Professor Nouriel Roubini of New York University: “We have reached stall speed. Any shock at this point can tip you back into recession. With interbank spreads rising, you can get a vicious circle like 2008-2009. There is a 40-perccent chance of double-dip recession in the US, and worse in Japan. Even if it is not technically a recession it will feel like it.”

President Obama is looking at another round of economic stimulus to stave off another dip, but his plans — a payroll tax holiday and targeted tax cuts — nibble at the edges and are only of temporary value. The real solution — infrastructure investment, just like during the Great Depression — requires a of political will that simply doesn’t exist: “The naysayers, deficit hawks, government-haters and Social Darwinists who don’t have a clue what to do would rather do nothing.” Infrastructure improvements have no natural constituency; roads don’t have armies of lobbyists. And because we’ll only nibble at the edges of the economic crisis, the possibility of a double-dip recession will be very real, whatever its reasons.

What happens if we kick over into a double-dip recession? Unfortunately, there aren’t any arrows left in the quiver to deal with it. “The bitter truth is that there is no way out of this with monetary and fiscal policy,” according to Hans-Werner Sinn, the head of Germany’s IFO Institute. “They will just have to see their living standards go down. I see a decade of difficulties for the US.”

I’ve been doom-and-gloom this week, but not without reason. The situation we face politically and economically is dire. The decisions we make — as an individual voter, as the country as a whole — have consequences. I wrote yesterday that November represents a maturity moment for the American electorate. The choice that every voter faces in November isn’t a choice between a good and a bad, no matter how much politicians on both sides of the aisle present it as such. No, a vote in November is a choice between a bad and a bad. The maturity moment comes from differentiating between the bads, from choosing the least bad of the two.

The world is watching.

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