It has not been exactly a perfect storm, but certain policies and trends did come together to hamper economic growth in recent years.
I don’t know who is to blame for easy credit in housing, and it doesn’t appear that I am alone in this deficiency. It would be helpful if the topic could be discussed outside the partisanship of this election year.
When it comes to greatly elevated energy costs, another drag on the economy, I mainly blame the Left, but also the Right to a modest degree. For years the Left has prevented almost any new drilling for oil in the United States and also opposed the building of new refineries or even the clean burning of coal. This was a feel-good position to show that one is ecologically pure at heart. The thought seemed to be that if America didn’t produce the oil, or burn coal (or develop nuclear power) we wouldn’t use the same amount of oil imported from somewhere else and would flock to buses and (non-existent) trains. That expectation was wrong, wasn’t it?
Meanwhile, the Right, including the Bush Administration (until lately), failed to recognize the usefulness of the new plug-in hybrid technology that could greatly reduce our use of oil in the transportation sector. PHEVS are a win-win strategy for saving oil, lowering costs and preventing pollution. Promoting them--and lowering oil use--would have helped the conservative case for drilling for domestic oil.
PHEVS are not a new idea; Discovery Institute has been promoting this technology for several years. But the first reaction from the Administration was a yawn. Of course, the Democrats were no more eager for PHEVS until recently than were the Republicans, but they also were not in charge. (To their great credit, new leaders in the Department of Transportation and Department of Energy seem willing to get moving on these priorities.)
So, looking back, the right answer was to drill for oil (build refineries, clean coal burning power stations and nuclear power plants) and simultaneously allow the country to greatly reduce dependence on all oil by deploying plug-in hybrids (PHEVS).
A related energy/transportation issue where public policy has neglected the economy’s long-term interest is passenger rail. For at least twelve years Discovery Institute has been promoting a revived national passenger rail system. The Bush Administration was slow at first to see the need for reform and redirection of Amtrak. In reality, we would be better off today if the federal government had given this serious attention ten years ago. It would have reduced traffic congestion, saved oil and provided a badly needed national security alternative to our crowded airports. Eventually, the Bush Administration did “get on board"-- weakly--but its modest reform program met a really reckless opposition from Democrats who were beholden to the Amtrak rail unions. (The latter don't seem to realize that a new system would be a bigger system, with more jobs.)
The Democrats don't even want to build a serious, European style system, let alone a system that provides incentives by the private sector (as we proposed). And the Republicans, while not opposed, are also not much interested. It is a poor political bet by both parties. Have the two parties forgotten how many people live close to major rail routes that already exist? They are ignoring that huge constituency, for a start.
So, on balance, Democrats get most of the blame for the transportation and energy problems that have helped run up the cost of oil and contributed to inflation. But Republicans don’t get any kudos, either.
Next comes foreign trade, an increasing share of America’s economic future. Bob Samuelson writes about it today. Here, the Republicans have been generally positive and the Democrats—at least as a party in Congress, including the two lead presidential candidates—have been derelict and irresponsible. Again, the unions have undue influence and serious Democrats (such as the former leaders who spoke out yesterday) know it.
Finally, there is the other big hope for our economic future, the high technology sector. Once again, the Democrats have been AWOL on a key issue, FISA, chiefly because, one suspects, they consider the telephone companies that are threatened with major lawsuits for helping the government spy on potential terrorists to be political allies of the Republicans. That’s bad enough. But there also has been a general ho-hum attitude toward deregulation in the tech field and little appetite for standing up for American companies as they battle, for example, mercantilist regulators from the European Union. Of course, the Republicans haven’t exactly challenged the Democrats by making deregulation a high priority, either.
Eventually, these failures of economic and infrastructure policy catch up with you, even if you are the United States of America.
But, I admit, I don’t know whom to blame, or blame most, for the credit collapse. Do you?