Jeffrey Sachs: We’re almost three years into this administration, and there’s never been a plan. And that’s what everybody feels.

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    Aug 20, 2011 1:59 PM GMT
    Sachs is a liberal economist.

    "We're almost three years into this administration, and there's never been a plan. And that's what everybody feels. And the president didn't lead. He waited. The quintessential image, sadly, of an administration that I supported and hoped for much better, is the president waiting by the phone to hear what Congress calls to tell him. It doesn't work in this country that way. It's not a matter that it's August. It's a matter that it's August 2011. So we've been drifting for a very long time. And we've been drifting down. And we had a short-term plan that failed. A short-term stimulus that was supposed to get the economy back on track, but it failed. And now we have nothing behind it. And we have no agreements, and we have no leadership. And, frankly, I do think it's pretty odd the president's on vacation right now. Normally I wouldn't care about such things, but the world markets are in deep crisis. It's no joke. This isn't just an up-and-down little blip. This is a very serious situation."
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    Aug 20, 2011 2:28 PM GMT
    I wouldn't call Sachs a "liberal."
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    Aug 20, 2011 2:55 PM GMT
    You do know what Sachs' plan is, right? icon_lol.gif we face a world economy with weak aggregate demand in the US and Europe, bulging budget deficits, sovereign debt downgrading and consumers unwilling to borrow. Governments are fighting for market credibility via draconian cuts in spending. This too is the wrong approach. We should avoid a simplistic austerity to follow the simplistic stimulus of last year. Here are some suggested guidelines.

    First, governments should work within a medium-term budget framework of five years, and within a decade-long strategy on economic transformation. Deficit cutting should start now, not later, to achieve manageable debt-to-GDP ratios before 2015.

    Second, governments should explain, and the public should learn, that there is little that economic policy can do to create high-quality jobs in the short term. Good jobs result from good education, cutting-edge technology, reliable infrastructure and adequate outlays of private capital, and thus are the outcome of years of sustained public and private investments. Governments need actively to promote post-secondary education.

    Third, governments must of course also ensure social safety nets: income support for the poor, universal access to basic healthcare and education, a scaling up of job training programmes and promotion of higher education.

    Fourth, governments should steer their economies towards needed long-term structural transformation. External-deficit countries such as the US and UK will need to promote exports over the next few years, while all countries must promote clean energy and new transport infrastructure.

    Fifth, governments and the public should insist that the rich pay more in income and wealth taxes – indeed, a lot more. The upward re-distribution of the past 25 years has made our economies into extravagant playgrounds for the super-wealthy. Politicians of both the mainstream left and right in the US and UK have fawned over those who pay their campaign bills in return for low taxation. Even playgrounds should collect tolls – when it is billionaires in the sandpit.

    We need, in sum, to reset our macroeconomic timetables. There are no short-term miracles, only the threat of more bubbles if we pursue economic illusions. To rebuild our economies, the watchword must be investment rather than stimulus.

    If 100% cuts and 0% additional revenue isn't "simplistic austerity" I don't know what is.
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    Aug 20, 2011 3:23 PM GMT
    Riddler, as you say

    "Sachs is a liberal economist."

    His disappointment with Obama is that the president hasn't done more of what


    I understand the criticism coming from Dr. Jeffrey Sachs.

    But is your point that Obama should do more to fight the backward thinking of the current Republican Party?

    If so, then you and I and Dr. Sachs may all finally be in agreement.
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    Aug 20, 2011 3:43 PM GMT
    riddler78 saidSachs is a liberal economist.

    "A short-term stimulus that was supposed to get the economy back on track, but it failed.

    That's because ...

    A) almost $3 trillion in stimulus (spending + Fed liquidity injections) wasn't nearly enough. (Apparently those who cling to this notion know the amount that is required, but don't want to share it with us....) icon_rolleyes.gif

    B) the stimulus DID work... it "saved or created" tens of millions of jobs. icon_lol.gif
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    Aug 20, 2011 4:08 PM GMT
    jprichva said
    1) The stimulus package was $787 billion, not $3 trillion. You can add anything you want into the mix and call it 'stimulus', but the package that is commonly referred to was $787 billion.

    I also included QE1 and QE2.

    jprichva said
    2) Krugman estimated at the time the stimulus was being passed that a better estimate of needed stimulus was around $2.2 billion. He openly 'shared' this with us.

    Do you concur? I've asked this "how much stimulus is needed?" question here on RJ many times and none of the liberals have yet to cite a number (or even cite someone else's number).

    jprichva said
    3) The effect of the stimulus was reduced by the approximately $500 billion that was cut from state and local budgets. You can argue (if you want) that these are not the same thing, but to a macro economy they are precisely the same. The point of the stimulus was to inject money into the economy. Budget cuts at the state level removed 2/3 of that money. Krugman estimates that actual stimulus effect was on the order of $250 billion or so.

    Yep, so government payrolls were a prime beneficiary of the stimulus.

    jprichva said
    4) It is now known that the economy was in even worse shape than the CBO or anyone else calculated at the time. So the current number needed for effective stimulus at this point would be somewhere around $3 trillion.

    Thanks for going on the record - something nobody else on here has done.

    jprichva said

    5) The debt-ceiling deal took $2 trillion out of the economy over the next several years.

    Out of the economy? Or out of increased government spending?

    Anyway, I seriously doubt we'll ever see that this deal that was agreed to will ever cut anything close to $200 billion in spending per year, so not to worry!

    jprichva said
    6) We are fucked, thanks to Republicans....

    ... AND Democrats.