Tuesday, May 3, 2011

America's Econony

The Economist has an article about what is wrong with America's economy. The article has some great points to usefully redefine the debate about competitiveness. The article also points out how most politicians are failing to promote changes that will truly improve the economy of the majority of working people.

He [Obama] likes to frame America’s challenges in terms of “competitiveness”, particularly versus China. America’s prosperity, he argues, depends on “out-innovating, out-educating and out-building” China. This is mostly nonsense. America’s prosperity depends not on other countries’ productivity growth, but on its own (actually pretty fast) pace.

The system of corporate taxation is a mess and deters domestic investment. Mr Obama is right that America’s infrastructure is creaking. But the solution there has as much to do with reforming Neanderthal funding systems as it does with the greater public spending he advocates.

The budget deficit is huge and public debt, at over 90% of GDP when measured in an internationally comparable manner, is high and rising fast. Apart from Japan, America is the only big rich economy that does not have a plan for getting its public finances under control.

The bad news—and the second reason for gloom about what the politicians are up to—is that neither party is prepared to make the basic compromises that are essential to a deal.