Today, Barack Obama will be inaugurated as the 44th President of the United States. He faces a plethora of serious problems, but top of the list is the sick American economy. Mr Obama has already assembled a formidable economic team and pledged a massive stimulus package. But will it be enough to put the US economy back on the right track - or will it result in a debt-laden nation wallowing in a Japanese-style deflationary spiral? Read the views - and decide for yourself!
YES, says Jonathan Eley, online editor, Investors Chronicle:
"It's the economy, stupid!", was the taunt Governor Bill Clinton famously directed at the elder George Bush during the 1992 election campaign. And the turning point in Senator Obama's campaign came in September, when Lehman Brothers collapsed and the economy lurched deeper into recession.
Critics will say that it's nonsense to suppose that one man can drag the US economy out of recession, and that the best anyone in DC can hope to do is limit the depth or the duration of the downturn - which, I readily admit, is far more serious than that faced by Mr Clinton, who entered office just as the economy was starting to recover.
But... look at the degree of power that Mr Obama has on Capitol Hill. The Democrats control both houses of Congress and the presidency, giving them huge legislative leeway for at least the next two years. The stimulus plan they have proposed involves heavy spending on America's surprisingly dilapidated infrastructure, rather than just another round of tax cuts for the better off, and has attracted support from some notable economists such as Paul Krugman and Robert Reich.
This is perhaps not surprising, given the economic team that Obama has assembled. He's appointed some of America's finest economic minds as advisers, not just a bunch of his Wall Street buddies.
Another plus is the sea change in views in America. A nation that had come to believe, in Reagan's words, that big government was part of the problem, not the solution, has been forced to reappraise that view. Many Americans now regard big business and Wall Street as greedy and self-serving, and are ready to accept that the public sector may contribute to national prosperity.
Lastly, there's the man himself and his impact on the country. Whatever you may feel about his style, his 'change' rhetoric or the absurd media frenzy surrounding his election, there's no doubt that he's galvanized America like no president since JFK. His approval ratings are astounding. These intangible things matter. If America feels renewed and energised under President Obama, then it could pull itself out of the mire quicker than many think."
NO, says Russ Roberts, professor of economics at George Mason University:
"I love the image of President Obama leading the country out of recession. America is lost. Adrift. Off the path. But the Great Leader with his torch (or lantern or GPS system, depending on one's taste for nostalgia versus gritty realism) will lead us home, into the light, into the future, towards prosperity.
It makes for a good future hagiography. For human beings in the real world - it's a fantasy. Barack Obama has no idea of how to get the economy out of the mess we're in. That doesn't mean we're not going to get out. Or that he might help. It's just that the phrase "lead us out of the recession" implies a plan and design that isn't plausible in the current economic environment.
Until a few months ago, a lot of economists, including not a few Nobel Laureates, thought that we'd whipped this whole business cycle thing. Over the last quarter century, the American economy has had only two very mild recessions. Now all of a sudden, people are worrying the economy is going to go Japanese and enter a decade of stagnation.
So it's a time for humility rather than hubris in my profession. Obama's economic team, for all its brain power and good intentions, is in uncharted territory. There's no recipe or manual or roadmap for getting the economy back on track. No one is quite sure how to correct imbalances in financial markets and the housing market. And no one knows how to create confidence, the biggest element lacking in the current economic climate.
No man or woman runs the economy. No man or woman or team of people can possibly plan the evolution of the economy in the coming months. America will come out of the recession but the time and pace are unknown. Obama can help. But he can just as easily slow down any recovery. Some part of the current mess we're in is the result of erratic government policy that has added to the uncertainty facing consumer, investors, and entrepreneurs."
Watch Russ's podcasts at http://econtalk.org...
COMMENTS ON THIS ARTICLE...
"Is any part of American society more irresponsible with money than the government? Does any one live beyond their means on borrowed funds as much as the government? And we want them to save us?"
"Paul Krugman received his Nobel prize for Economics for the same reason that Carter got his for Peace. The socialists love him"
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