Can We Combat the Next Recession?
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Here’s What You Need to Know
Between weak European central banks, a distorted Chinese property market, political uncertainty in the West, and historically high private and public debt, the global economy is unquestionably a volatile place right now. These uncertain times beg the question – are we prepared to combat a recession? The answer, in a word, is no. However, looking at the state of economic affairs, Stanford University economics professor and former Chairman of President George H.W. Bush’s Council of Economic Advisors, Michael J. Boskin, sees several ways the U.S. and other advanced economies could and should prepare for the next global economic downturn.
- Monetary Policy: While the U.S. unemployment rate is around 5%, which is what most economists consider full employment, and while the Fed is expected to raise its target interest rates in December – the U.S. central bank is moving too slowly. This problem is now being exacerbated with Fed Chair Janet Yellen’s consideration to allow inflation to run a little hotter than normal and create a “high-pressure economy.” In order to be best prepared for a possible recession, Boskin declares the economy requires monetary-policy normalization, and it requires it move at a faster pace than the Fed is currently operating.
- Fiscal Policy: Entitlement programs are going bankrupt while the American economy is saddled with a tax code riddled with often nonsensical policies that inhibit growth – both of these policy sectors must be reformed to enact an overall productivity-enhancing, supply-side fiscal policy. Boskin points out that without correcting these massive, systemic problems the U.S. central bank will remain burdened leaving it inflexible and ill-prepared to respond to economic turmoil.
- Government Spending: The overall thrust of Boskin’s argument lies in an overall shift in the paradigm surrounding government spending. He explains that government spending must not be viewed as the first, best solution to economic woes by policymakers. This type of short-sighted understanding of deficit-financed spending ignores the long-term implications of high debt levels and fails to acknowledge the fact that these public spending programs rarely deliver the results they promise. The reality of stimulus policies, Boskin argues, is that they are only capable of succeeding if they are carefully vetted and implemented quickly – neither of which being feats politicians have traditionally proven capable of.
News You Can Use
BIG TOBACCO WANTS A TAX
Tobacco giant RJ Reynolds is currently fighting against a California tobacco tax, while fighting for a new tobacco tax in Missouri. The logic in spending $8 million and counting to push for a tax on your own business comes from the fact that RJ Reynolds’ only real competitors in Missouri are a number of smaller, off-brand cigarette companies whose business will be significantly more hampered by the tax than a behemoth like RJ Reynolds. It is just the latest example of how understanding and exposing your opponents’true motives can help you overcome their challenge.
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WHO’S WATCHING THE FCC?
Federal Communications Commission (FCC) Chairman Tom Wheeler’s time leading the regulatory body has been checkered with controversy, but now new revelations about the independent watchdog meant to oversee the agency have critics even more concerned. Accusations of interdependence between the FCC’s Inspector General (IG) and the Chairman have brought into question how independent the IG really is. A letter from Republican lawmakers revealed that FCC Inspector General David Hunt shared agency audits with Chairman Wheeler, and that the Chairman’s office was able to influence hiring within the IG’s office. As Chairman Wheeler’s tenure ends, and a new President prepares to appoint his replacement, it seems likely this latest controversy will only increase the pressure to reform the FCC and increase the IG’s independence.
FREELANCERS’ PRESIDENTIAL WISH LIST
With one in three Americans having engaged in the freelance economy in the past year, there is a large and growing constituency within the U.S. workforce looking for the next president to enact policies to help freelancers in a variety of industries. This wish list includes greater efforts to research and understand the freelance economy, support for programs promoting income predictability, and potentially expanding the Small Business Administration to provide more information and support for the freelance industry. As the American workforce is evolving, what it expects from its leaders is too – the next President will need to address the concerns of freelancers and the gig economy in a way not required by any previous President. Rather than trying to stop the expansion of freelancers, government has to adapt labor policies to recognize their value to the economy.
INTERNET OF VULNERABLE THINGS
Last Friday morning, numerous websites and key online services, including Spotify and Twitter, were crippled due to a distributed denial of service (DDoS) attack on Dyn, a major domain name service provider. Hackers reportedly hacked tens of thousands of internet of things devices – including household appliances, digital video recorders, security cameras, and internet routers – to send a massive amount of traffic to Dyn and disrupt its ability to function. This effort marks only one event of a major spike in coordinated DDoS attacks that appear to be probing the insecure internet of things to measure the defenses of companies operating critical online services. Sen. Mark Warner (D-VA) has alreadyannounced a probe into the most recent cyberattack, looking into what tools may be needed and could be available to combat similar attacks in the future. Regardless, the disturbing event underlines how shockingly fragile the internet is to the increasingly sophisticated attacks launched by hackers.
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TRIPPING UP THE ASIA PIVOT
Last week, Filipino President Rodrigo Duterte landed a possibly fatal blow to one of President Obama’s signature foreign policy initiatives – the Asia pivot. President Obama had intended on refocusing U.S. diplomatic interests on East Asia to combat China’s influence, but speaking in Beijing, the Filipino President announced a “separation” with the U.S. He went on to claim “America has lost now,” and said he would consider working more closely with Russia and China. While the Duterte government has proven to be a chaotic one, the major news here is still that America’s one of the most important and steadfast allies in the region publicly criticized U.S. leadership and proposed aligning themselves with direct geopolitical opponents of U.S. interests.
SORRY, THAT BONUS WAS ACTUALLY A LOAN
During the wars in Iraq and Afghanistan a decade ago, the California National Guard enticed thousands of soldiers to reenlist and go to war with bonuses of $15,000 or more. Now the Defense Department claims the bonuses were paid incorrectly and those same soldiers owe that money back – with interest. After an audit revealed the California National Guard improperly distributed bonuses in order to achieve enlistment targets, nearly 10,000 combat veterans were hit with interest charges, wage garnishments, and tax liens if they refuse to pay back the money. Along with criticizing the policy generally, Speaker Paul Ryan specifically pointed out that the House has already established a statute of limitations on the military’s ability to recover future overpayments within the FY 2017 National Defense Authorization Act. Secretary of Defense Ash Carter has sinceannounced the Pentagon will stop reclaiming the bonuses.
THE GOP’S BIG MONEY WOMEN
The upper echelon of the Republican donor class has traditionally been a boys’ club, but lately more and more women are participating in high-dollar fundraising efforts on behalf of GOP candidates and PACs. So far 37 women rank among the top 150 donors to super PACs this cycle, and they include large contributions from female leaders like Wisconsin roofing company billionaire Diane Hendricks, Bay Area clinical research Laure Woods, and Marlene Ricketts, matriarch of the family that owns the Chicago Cubs. The change is evidence of more successful women seeing an opportunity to hold great influence in politics through financing super PACs and other big money groups that have been used to steer political thinking since the 2010 Citizens United decision.
Mark Your Calendars
Tuesday, November 8: Election Day