Economic news in recent weeks has been rather discouraging, as agreed by experts ranging from Martin Feldstein to Paul Krugman to Nouriel Roubini. Only a few, such as Warren Buffett, continue to express optimism about the economic trajectory, and Buffett's credibility has been questioned for a variety of reasons, including his strong backing for Goldman Sachs and evidence that he's shifted from earnest midwestern large businessman to Wall Street insider/Tycoon in the past 2-3 years. Not only is Buffett one of the very few optimists - his statements have suggested that there's no need for stimulus to the economy, which will take care of itself in a few years (no need to worry abt struggles of mid/low income Americans?). Buffett's attitude can be summarized in one word: complacency (or don't worry - be happy).
As WSJ marketwatch.com states today, although there are positive earnings reports this month, stock prices are still threatened by the lack of credit to small businesses (commented on and criticized by Ben Bernanke this week), state budget deficits, and persistently high unemployment.
So this raises the question: is Obama's economic team getting us anywhere?
As many have noticed, the Summers/Geithner economic team did have some success, working with Bernanke, pulling the economy out of the deep crisis of 2007-2009. But the recovery is far from "complete," and this week Martin Feldstein stated that the economic recession is not over yet - we are still in recession according to him.
We seem to be in a period of stagnation at this point, with no movement in employment and little evidence of recovery in recent months. Not only that, but the economic stimulus package (half the size of what it should have been according to experts such as Princeton's Paul Krugman) is starting to run out. Because the stimulus spending will be declining, there may be even greater downside pressure to the economy. There are also concerns about 'deflation' - which means that there may be downside pressure - the economy may be slowing down to the point that wages, as well as prices and GDP growth may be starting to decline. While nations such as Brazil, India, and China experience rapid growth, the US is growing more slowly, while our population continues to expand - leading to lower standard of living and little prospect of substantial improvement in the next 2-3 years.
Is there any light at the end of the economic tunnel we're in? Talk of austerity suggests that, rather than using a Keynesian approach to boost the economy (used successfully by Presidents of both parties from 1930s to 1980s), the mood is to cut spending (i.e., the tactic used during the Herbert Hoover Administration, leading to the Great Depression).
Perhaps it would be appropriate to replace Larry Summers with Laura Tyson, and to consider a transition to a new Treasury Secretary in 2011.
We need new economic leadership - the current team seems to be running out of gas.
It's true that the Republican stalling tactics have been a major obstacle, and perhaps most of the blame for economic stagnation belongs with them and is shared by the few blue dog Senators such as Ben Nelson who have allowed their filibusters. But the entire approach of Summers, Geithner, and the WH Chief of Staff has been flawed in many respects. They continue to act as if we are not in a crisis, and there's little sign that this is going to change.