Once again, the economy has not performed as well as the high priests of the economics profession had expected. “The economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee expected,” the Federal Open Market Committee said today. “The slower pace of the recovery reflects in part factors that are likely to be temporary.”
How many times are we going to hear that a cyclical recovery is occurring, but has been interrupted by temporary or “transitory” factors, in the words of Fed chief Ben Bernanke? It’s bad winter weather that keeps stores closed, they say. Or it’s the Japanese disasters. Or it’s the Greek debt crisis. Or it’s surging energy prices.
The common theme is that if Americans just wait for these temporary, transitory factors to pass, the economy will stage a genuine recovery that starts to put more people to work and allows home values to stabilize. We can return to the status quo that prevailed before the financial crisis.
But what if the economists are just plain misdiagnosing what is happening in the U.S. and global economies? I believe that we face a deep structural economic challenge that was concealed by the easy money that flowed into the stock market and homes beginning in the mid 1990s. We turned our homes into ATM’s and did not need to concentrate on the fundamentals of competitiveness and energy efficiency.
Now the easy money has dried up, and we recognize that we are not creating enough new industries fast enough to create the millions of jobs we need. And we are incredibly dependent on Third World dictatorships that provide us our oil and sometimes require military protection.
The United States should be devising a national strategy, in concert with business leaders and with state and regional governments, to dig out of this deep structural hole. But the economists are actively discouraging that because they promise that “things will get back to normal.” We should remember that economists make good scorekeepers, but they know nothing about how to create wealth. In sports terms, they can keep track of who’s winning, but they should not be managing athletes. Aside from a handful of microeconomists that are kept hidden in the profession’s closet, none of the major economists who dominate the headlines is offering a strategy for using American innovation to create growth and jobs. It is a blank spot in their minds.
The latest disappointment in the economic news today should be one more incentive to all Americans to recognize that our economy is too important to be left to the economists.