The Wasted Economic Recovery

Are we in the golden hour? And did we already blow it?
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If the U.S. economy can avoid a recession between now and next summer, the current economic expansion will officially be the longest in American history. It’s plausible that the growth streak still has years to run, but when one ponders the progress the lack of progress U.S. government has made in improving the foundations of the economy or planning for the future, it should frighten one to ponder that this is good as it gets.

One could compose a laundry list of government programs and laws that the American political system has proved incapable of reforming at an acceptable pace, but here are the three most important:

Education: Since the end of the recession in 2009, the total size of student loan debt outstanding has doubled to just less than $1.5 trillion. Roughly 1 in 10 student borrowers in repayment are delinquent, and while, so far, the direct macroeconomic implications of this have so far been slight, that is beginning to change. What is certain is that if total student indebtedness continues to surge ever upward it will ultimately have a large, deleterious effect on growth and American welfare.

What’s most tragic is that education finance reform should be an area ripe for bipartisan compromise. Unlike many other issues, Democrats and Republicans don’t fundamentally disagree on the role of higher education in the American economy. Americans see their country as a meritocracy, making institutions of higher learning essential tools for social mobility. But the university can’t be a means for social mobility it if also saddles graduates and dropouts with debt that significantly lowers their net worth over the course of their lifetimes. Reform that can be sold as investment in education to Democratic constituencies and retributive regulation of the free-spending higher-education establishment to Republican ones is quite possible to imagine, and should have been done long ago.

The Environment: For decades, we’ve been taking a massive economic gamble by not insuring climate-change related risk. A dispassionate assessment of the science of climate change and the likely economic impact of policies that would ameliorate it clearly argues for taxing carbon. And it’s possible to raise the price of carbon through taxes while keeping the overall size of government steady. A carbon tax would likely slow economic growth, but not nearly as much as climate change will.

Government debt: The Republican Party just celebrated the doubling of U.S. government during the Obama years with a $2.7 trillion debt binge of their own. The jury is out on the question of how much sovereign debt is too much debt, and that is a public discussion that desperately needs having. We should also publicly discuss whom should be the beneficiary that added debt. The most recent tax rewrite was none of those things. Nobody who voted for the bill would admit its budgetary impact, absolving them of answering either of those most important questions.

Meanwhile, government, corporate, and household debt continues to grow, so that the total indebtedness of the economy nears its pre-crisis peak. Higher debt loads make the economy more fragile and more vulnerable to the failure to solve other problems, like education finance and climate change reform.

The problem with decrying gridlock is that it has a clear moral logic to obstruction when a citizenry is divided on fundamental questions, like whether climate change is real or not. But all too often the mostly right-wing refusal to compromise stems from a growing belief that the other side is illegitimate and should be prevented from wielding power at any cost. This stance is a perversion of that same logic, but attractive nonetheless. The folks adopting this stance should carefully consider, however, the historical record of countries that become paralysed by indecision and paranoia. It’s not one we should like to repeat.

Christopher Matthews is a writer who splits his time between New York City and Accra, Ghana, with an interest in the intersection of markets, the economy, and public policy. He previously held staff positions at Axios, Fortune Magazine, and Time Magazine, and has been published in Forbes and Debtwire.

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