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Turning the Corner: U.S. Economic Policy and National Recovery

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Presentation on theme: "Turning the Corner: U.S. Economic Policy and National Recovery"— Presentation transcript:

1 Turning the Corner: U.S. Economic Policy and National Recovery
Alumni Affairs Dinner Alumni Center Northeastern University Barry Bluestone Dean, School of Social Science, Urban Affairs, and Public Policy March 4, 2009

2 The 1970s - Troubled Times OPEC and the Energy Crisis
Declining Productivity; Sluggish Growth, Rising Unemployment Wage Declines, Stagnant Family Incomes Growing Inequality

3 The 1980s Supply Side Economics Massive Tax Cut/Massive DOD Buildup
Growing Federal Deficits Deregulation Privatization Rising Inequality

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8 Why Prosperity Ended? The Conventional Wisdom
Oil Crisis Strong unions generate Wage-Price Spiral Mushrooming Federal Deficits Inflationary Pressures Falling Family Saving Rates Too much Government Regulation Too much Social Welfare Spending Corporate Myopia in face of Import Challenge

9 Prosperity Regained

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12 Wall Street Model Policies
Tight monetary policy to keep inflation under control Deficit Reduction/Surplus Generation to raise aggregate savings rate Free Trade to keep prices down Weak Trade Unions to keep wages down Welfare Reform aimed at increasing labor supply

13 The Wall Street Model of Growth

14 The Wall Street Model

15 You Live by the Wall Street Model … You die by the Wall Street Model
Based on stock market appreciation Focus on financial transactions, not real production of goods and services Casino Society Massive Debt – Government, Households, Foreign Massive Redistribution of Income and wealth ... CREATES MASSIVE INSTABILITY

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17 11,616,000

18 January 2009: 7.6%

19 Loss in Employment (December 2007-December 2008)
Change in Employment Percentage Change Construction -632,000 -8.5% Manufacturing -791,000 -5.7% Retail Trade -522,000 -3.4% Financial Services -148,000 -1.8% Temp Services -490,000 -19.0%

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22 Personal Savings Rates Plummeting

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24 Federal Debt nearly double since 2000

25 The Debt Bomb With massive personal debt, federal debt, and adverse balance of trade With the Wall Street psychology of quasi-Ponzi schemes, the tinderbox was set for ignition The unraveling of the subprime mortgage market was the spark that set in motion the economic collapse we have experienced

26 Economic Collapse Massive Foreclosures
Massive Wealth Effect … with personal portfolios in free-fall Translation of financial collapse into real economy … with sharp cutbacks in demand and consequently sharp increases in unemployment Now states and cities in free fall, adding to the crisis Vicious Circle … with a stimulus package perhaps not large enough or soon enough to keep unemployment from reaching 10 percent by late this year

27 A Better Stimulus Package

28 What Really Needs to be Done? – National Economy
Phase I – Instant Stimulus “Uncle Sam” Debit Card Home Price Insurance System Phase II – Short-term Stimulus Massive General State and Local Revenue Sharing Extended Unemployment Benefits Phase III – Longer-term Stimulus Public Infrastructure Investment


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