Uneasy Days for the Economy

Listening the other day to discouraging economic forecasts from Alan Greenspan and Larry Summers, I was reminded of the many polls showing that Americans worry their children won't have the same opportunities they did. To be clear, neither the former Fed chairman nor the former Treasury secretary was predicting recessions or even downturns. But there was little in their words to the National Association for Business Economics to suggest that brighter days are on the immediate horizon.

Their diagnoses and suggested treatments of the economy weren't exactly the same, but both nonetheless left the listener deeply unsettled. Summers argues that it's been a long time since the United States had "healthy, strong economic growth in a full-capacity economy." He argues against current government austerity measures, particularly at a time when the country—he asserts—desperately needs an increase in consumer demand. He also complains that regulatory and policy restraints have restrained economic growth, specifically pointing to the fact that no new oil refineries have been built in the United States in decades. Meanwhile, austerity has led us to a lack of public investment; Summers gives the example of the currently dilapidated Kennedy airport in New York, at a time when borrowing rates are under 3 percent, which would normally be the perfect situation for government to rebuild infrastructure.

Greenspan argued for the need for immigration reform, saying that deporting illegal immigrants would lead to our economy "falling apart." On the other end of the immigration spectrum, he said, the H-1B program for admission of highly skilled workers is important because "we can't staff the high-tech needs of our country with the kids coming out of our high schools." Yet, the prospects for immigration reform in the House, despite the backing of leading Republicans, are problematic at best, due to entrenched opposition within the GOP base.

At the same time, and more broadly, Americans are worried about where our country is—and seems to be—headed. A Wall Street Journal/NBC News poll in May 2012 asked, "Do you feel confident or not confident that life for our children's generation will be better than it has been for us?" Only 30 percent of respondents felt confident, while 63 percent indicated they were not. A New York Times/CBS News poll taken in January of this year asked, "Do you think the future of the next generation of Americans will be better, worse, or about the same as life today?" Only 20 percent said better, 53 percent indicated worse, and 25 percent said about the same. In late 2012, a USA Today/Gallup poll asked, "In America, each generation has tried to have a better life than their parents, with a better living standard, better homes, a better education, and so on. How likely do you think it is that today's youth will have a better life than their parents?" At the time of the poll, the public was evenly split, with 49 percent saying likely, and 50 percent indicating that improvement was unlikely. Results differed widely based on exactly how the question was framed, but at best, in what has historically been one of the most inherently optimistic nations, at least (roughly) half of the population is doubtful that things will be better for succeeding generations.

Via: National Journal

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Alan Greenspan: What Went Wrong

Alan Greenspan Melissa Golden for The Wall Street Journal, Grooming by Melissa Schwartz Jones

Alan Greenspan, the former chairman of the Federal Reserve, goes to a lot of parties. He and his wife, the TV journalist Andrea Mitchell, "sort of get invited everywhere," he says, sitting in front of the long bay window in his office on Connecticut Avenue in Washington, D.C. Lately, though, cocktails and dinners seem to have guest lists drawn almost exclusively from one political party or the other. "It used to be a ritualistic 50-50 at parties—the doyennes of culture and partying were very strict about bipartisanship," he adds. "That doesn't exist anymore."

In his new book "The Map and the Territory," to be released on Tuesday, Mr. Greenspan, 87, goes on a hunt for what has gone wrong in American politics and in the U.S. economy. He doesn't blame the current administration for today's partisan divide. The culprit? "It's the benefits," he says, pointing to the disagreements between Republicans and Democrats over how to deal with the growth of entitlements.

In the book, he also ponders why the Fed failed to predict the financial crisis, where he himself went wrong and how that discovery has completely changed his worldview.

Mr. Greenspan's biggest revelation came one day about a year ago when he was playing with gross domestic savings numbers. What he found, to his surprise and initial skepticism, was that an increase in entitlements has closely corresponded to a decline in the country's savings. "We had this extraordinary increase in benefits, with each party trying to outbid the other," he says. "That practice has been eroding the country's flow of savings that's so critical in financing our capital investment." The decline in savings has been partly offset by borrowing from abroad, which brings us to our current foreign debt: "$5 trillion and counting," he says.

Via: WSJ

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