Sunday, February 15, 2009

The Big Fix

David Leonhardt is the NYTs economics columnist. I've been intending to recommend his excellent article from the Magazine a couple weeks ago: The Big Fix - Can Barack Obama Really Transform the U.S. Economy?.

This is the best primer I've seen not just to understand the stimulus issues, but on Obama's secondary agenda to modernize the US economy and move it into the 21st Century.

Regarding the size of the stimulus, consider this,
Growth is the only way for a government to pay off its debts in a relatively quick and painless fashion, allowing tax revenues to increase without tax rates having to rise. That is essentially what happened in the years after World War II. When the war ended, the federal government’s debt equaled 120 percent of the gross domestic product (more than twice as high as its likely level by the end of next year). The rapid economic growth of the 1950s and ’60s — more than 4 percent a year, compared with 2.5 percent in this decade — quickly whittled that debt away. Over the coming 25 years, if growth could be lifted by just one-tenth of a percentage point a year, the extra tax revenue would completely pay for an $800 billion stimulus package.
The issue then becomes what will drive the economic growth necessary to retire stimulus debt and that is where the modernization of the economy comes into play.

Read and understand Leonhardt. You won't feel literate in discussing Obama's plans until you do.

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