We could be in for a long, slow decade. There's a confluence of forces that are probably going to retard economic vitality.
Consumers are still overindebted, and it will take years of curtailed spending before households are back on a sustainable path. Federal and state governments also will have to pull back.
Labor markets were ill before the recession and are worse now.
Our trading partners in Europe and Japan are stagnant or in peril. Banks in this country are not lending to small businesses and banks elsewhere have huge write-downs to endure. The psychological war between business and the Obama administration also is taking a toll. Business types think the administration is stuffed with clueless professors. Some administration officials think corporate honchos are free-market hypocrites prowling for corporate welfare.
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What we have is not just a cycle but a condition. We could look back on the period from 1980 to 2006 as the long boom and the period from 2007 to 2014 or so as the nasty crawl.
In a previous column, I tried to imagine what a moderate Democratic growth agenda would look like. You could call it the Moon Shot Approach. In this approach, government tries to spur economic development first by creating the context for growth with a big infrastructure program and then by focusing subsidies and tax credits on key sectors, such as energy research.
The Republicans have their own growth agenda. You could call it the Unleash America Approach. The underlying worldview was deftly sketched out in Arthur C. Brooks' book, "The Battle: How the Fight Between Free Enterprise and Big Government Will Shape America's Future."
Brooks (no relation) argues that Americans are a uniquely entrepreneurial people. A nation of immigrants, "America's vast success might be explained in part by our genetic predisposition to embrace risks with potentially explosive rewards."
Brooks argues that 70 percent of Americans embrace this free-market and entrepreneurial vision. But 30 percent prefers a more government- centric, European-style vision. The battle, Brooks concludes, is between the 70 percent, trying to reclaim the country, and the 30 percent, which is now expanding the federal role on an array of fronts.
Paul Ryan, the most intellectually ambitious Republican in Congress, lavishly cites Brooks' book. For several years, Ryan has been promoting a roadmap to comprehensively reform the nation's tax and welfare system. He would sweep away most of the special-interest-favoring tax credits and subsidies and give people a chance to join a tax system with only two rates.
On the welfare-state side, he'd sweep away most subsidies to the middle and upper classes, such as the tax exemption on employee health plans. The idea would be to end the complex and sclerotic arrangements and solve the fiscal crisis. The effect would be to radically reduce the power of federal policy-makers and shift discretion (and risks) onto individuals.
The Democratic and Republican approaches have problems. The Moon Shot Approach relies on omniscient experts to pick out the engines of future growth and on public-spirited legislators to pass bills that maximize productivity.
The weakness of the Brooks and Ryan approach is that their sociology is off a bit. America is not a nation of risk-embracing pioneers. It is a nation of heroic bourgeois families who want to thrive within a secure social order.
Still, these two visions are better than the nativist and antiglobalist visions that will be arising. And despite the tough battle talk, they are combinable. At his best, Ryan wants to cleanse and rejuvenate the nation -- to sweep away the regulatory sclerosis that strangles flexibility and growth. At his best, Obama wants to create a context for innovation -- to employ blue-collar workers and to spur growth clusters such as Silicon Valley, which, let us remember, was a magical cocktail of federal research subsidies, hippie culture, entrepreneurial daring and university settings.
The two projects are in tension, but in a sane political culture they are not mutually exclusive.
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