A Chorus of Unity in a Dissonant World: Diane Swonk Looks at Policy Solutions for 2012 and Beyond

CHICAGO--(BUSINESS WIRE)--

In the April issue of Themes on the Economy^®, Chief Economist Diane Swonk says economists actually agree, across political parties, on the important policy issues facing the U.S. economy. “There is fairly widespread consensus that fiscal stimulus would be useful but isn't really an option without credible deficit reduction plans, and, that we need to start worrying more about the cumulative costs to our economy of running unemployment so high for so long.”

For more details, read this month's issue or watch a video presentation.

• The highlight at a recent gathering of economists in Washington was a frank speech from Federal Reserve Chairman Ben Bernanke, who worries that “much of the rebound we've seen in employment is just catch-up to earlier firing” done at the height of the financial crisis, as Swonk writes.
• Federal Reserve veterans Alan Blinder (appointed by a Democratic president ) and Larry Lindsey (appointed by a Republican) agreed on the need for change, telling the same group of economists that “the tax code could be simplified by reducing rates and phasing out deductions.”
• Congressional Budget Office (CBO) Director, Douglas Elmendorf, went even further and warned of catastrophic scenarios (such as another debt downgrade) if members of Congress don't work together to resolve crucial tax and spending issues, which will come to a head in early 2013.
• Swonk writes in her April newsletter that, while Washington gridlock appears daunting, one member of the Senate Budget Committee, Senator Mark Warner from Virginia, reminded us that (quoting Winston Churchill), “You can always count on the Americans to do the right thing – after they have tried everything else.”
• Some things are the same, even on the other side of the Atlantic. Our chief economist notes that, “While I was in Paris, The Economist magazine published an article, “France in Denial,” which my French friends agreed with wholeheartedly. The essence of the article is that France will be the last to enact wrenching labor and safety net reforms because politicians are in a deep state of denial” on deficit problems.

Diane Swonk concludes that, at least, “The U.S. has more time than Europe does (particularly France) to get its political act together,” when it comes to balancing entitlements and spending for the long haul. For more information, see the April issue of Themes on the Economy^®. Archived issues can be found at mesirowfinancial.com.

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