Wednesday, February 13, 2013

Clueless American Politicians

"I still think Obama makes a mistake by not trying to lift his game—by not taking his presidency and leadership to a new level that might break the political dysfunction in Washington. But it’s hard to quarrel with success, or with good luck."

David is right here and the mistake President Obama and all of American Politicians are doing here is:

"In the past three recoveries from recession, U.S. growth has not produced anywhere close to the job and income gains that previous generations of workers enjoyed. The wealthy continued to do well. But a point of increased growth today simply delivers fewer jobs across the economy and less money in the pockets of middle-class families than an identical point of growth produced in the 40 years after the Second World War.

This erosion between growth and the prosperity of average Americas is still vexing economists and a lot of lawmakers have yet to even acknowledge the problem. But repairing this link is arguably the most critical policy challenge for anyone who wants to lift the middle class."

That is President Obama's failure and I do not think State of Union Address effectively addressed any of these problems. 

One of the reasons American Political Class refuses this broken link between 'economic growth and prosperity for most Americans' is GOP regards any such characterization as 'class warfare'. Can you imagine Wall Street Journal Editorial ever accepting any doubts about Capitalism? That the Capitalism as practiced today in America is very one sided and it fails to 'lift all boats' in any sensible manner? Nay, that is never going to happen. (Read Larry Kudlow, he is still stuck with Laffer curves...) Hence GOP is not going to admit all this.

President Obama has this opportunity to talk about these issues and propose something meaningful about that. May be it is a basket of small initiatives like kindergarten help and increase minimum wage. But only two offerings would not make a comprehensive solution. Part of the problem is to make America sensitized to what is happen - broken link between general economic growth and prosperity to most Americans.

The other part is President Obama would have to make resources available for these basket of solutions (leaving aside the other half of more meaningful regulations on wild Capitalism as practiced today). The only way America has access to money is by way of borrowing. But when we are borrowing left and right to pop up Medicare to take care of our Seniors (our Past essentially), where is the room to borrow for Future?

Paul Krugman is right in a way that we should not worry about borrowing right now when economic growth is so low and income distribution is so skewed against majority of Americans. But he is essentially resigned to 'Medicare as Stimulus' considering GOP would never accommodate diverting savings of Medicare towards future investments.

But that is the precise case President Obama and Democrats need to make. We do not have any such case, nor any basic understanding from GOP. At times, GOP behaves as if they actively want to 'sabotage' any economic recovery just because of their animosity towards the President.

We see no way out from this quagmire.

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