Gregg Easterbrook’s prescription for healing the aging economy? Optimism! After noting that we’ve had two rounds of tax cuts and and two rounds of stimulus spending, all of which have failed to jump-start the economy, he remarks:
That means more than $7 trillion in borrowing for the economy in just five years, roughly the amount per capita, in today’s dollars, the United States borrowed during World War II. Amazingly, some commentators call this “austerity.” Whatever the label, the Keynesian borrow-to-spark-demand formula has not worked. It is time to accept that more government spending is not the solution.
If more borrowing or more tax cutting aren’t what the economy needs, what is? Optimism. Human psychology is a bigger force in economics than current policy debate acknowledges.
In 2005, many fundamentals of the economy were worrisome – a housing bubble, highly leveraged banks and investment banks, a profusion of liars’ loans. Yet the economy boomed, partly because optimism was universal.
In 2011, many fundamentals of the economy are sanguine – high corporate profits, no resource shortages, low interest rates, ample money supply, low international tensions. Yet the economy is flatlined, partly because there is little optimism.
In reflecting on my own circumstances, I have plenty of reasons for optimism. I have all of my own hair and teeth. I’m fitter than many men half my age. I take no medications. Barring the things about which little can be done and I find tolerable I’m in extremely good health.
I am mentally more acute, if anything, than I was ten years ago. As Camus paraphrases the conclusion of Oedipus at Colonus, “Despite so many ordeals, my advanced age and the nobility of my soul make me conclude that all is well.”
Blogging may play a part in that. For me it’s a form of therapy or mental gymnastics, like sudoku or a crossword puzzle.
Our economic circumstances are fine, too. We own our own home and are planning to stay there until we’re carried out feet first (the addition we put on several years ago made our home completely liveable on the first floor alone). Barring some catastrophe, in ten years our income will probably be higher than it is now albeit from different sources and our present income places us easily in the top quintile of income earners.
I recognize that many are not nearly so fortunate. How can they be helped?
As I scan the transcripts of recent speeches and interviews by our leaders, the persistent message I take away from our political leaders is one, ultimately, of pessimism. Does that help or hinder? I think the latter. I wish they’d find some way to split the difference between an out-of-touch and Pollyannaish optimism and overwhelming doom and gloom. Tenacity and confidence in the face of adversity, perhaps. I see the tenacity but not the confidence.