The New America Foundation’s Economic Growth Program announces the release of a major new paper, described by Joe Nocera in today’s New York Times as being “deeply nuanced” and having a “clear-eyed” view of our economic predicament.
The paper, “The Way Forward: Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and Competitiveness,” is authored by Daniel Alpert, Managing Partner of Westwood Capital, Robert Hockett, Professor of Law at Cornell University and consultant to the Federal Reserve Bank of New York, and Nouriel Roubini, Professor of Economics at New York University and Chairman of Roubini Global Economics.
The authors argue that we are not in an ordinary business downturn, but a balance sheet recession, occasioned by the worst credit-fueled bubble we have seen in the private sector since the 1920s. The root causes of this bubble lie in imbalances of supply and demand in the global economy and between labor and capital in the developed world. The result has been stagnant wages in the United States and levels of income and wealth inequality not seen since the pre-Great-Depression era.
The paper explains why the conventional and nonconventional policy tools that have been tried thus far -- including monetary reflation, indirect demand stimulation through tax breaks, and quantitative easing -- have failed and why the new turn toward austerity will be counter-productive.
The paper outlines the criteria that any post-bubble, post-bust recovery program must satisfy in order to meet today’s debt-deflationary challenge under conditions of oversupply and then lays out a three-pillared recovery plan.
1. A five-year $1.2 trillion major infrastructure investment program to stimulate demand and make the U.S. economy more competitive;
2. A debt-restructuring program to aggressively address the household debt overhang and to restore our financial and real estate markets to health;
3. A global reform program that can help restore balance to the world economy and that can facilitate the process of debt de-delevering in Europe and the United States.
Read Joe Nocera's article here.
Read "The Way Forward" here.
More on New America's Economic Growth program here.