What role does fiscal policy play in the health of the U.S. economy, both now and in the years to come?
Fiscal policy is an inherently important component of the entire economic agenda. However, fiscal policy has its limits. Robert Carson and I make this point in our recently released textbook "The American Economy: How It Works and How It Doesn't." Specifically, year after year of expansionary fiscal policy, running perennial federal budget deficits and amassing substantial debt have likely led to the sterilization of fiscal policy as a credible tool of economic policy. And if people come to believe that fiscal policy doesn't work well, guess what? It won't.
The economic recovery is uneven by geography, industry, occupation, age, gender and ethnicity. Broad-brush attempts at stimulus might have limited effects for specific states, localities, occupations, age groups, and people experiencing distinctly different sources of economic misfortune. Although it is not inconceivable that the federal government could pursue targeted policies, the track record of fiscal policy is fraught with lags in timing and implementation. With the federal government subject to calls for greater fiscal responsibility and predictability, it is probably safe to surmise that we will lean heavily on monetary policy to plot the course to economic growth.
Given your expertise in American economics, what issues should be given more consideration? What issues may be having a greater economic impact than the average American realizes?
I have to let out a little laugh when you ask me about economic issues. I have a whole book full of them in "Economic Issues Today: Alternative Approaches," which I co-authored with Robert Carson and Jason Hecht. So we can fret about consumer protection, the environment, regulation, taxes, the looming entitlement crisis, income inequality, international trade, budget deficits and debt, and on and on.
The controlling agenda item is economic growth. Getting back on the path of faster economic growth is going to make it easier to deal with the economic problems that relentlessly trouble Americans. The problems never go away, but a prosperous economy is better positioned to manage them.
The chanting about "Jobs, jobs, jobs!" deserves to be translated as "Growth, growth, growth!" The Great Recession and the subsequent feeble recovery have left unemployment stuck at high levels with disparately larger impacts on younger workers. Those 20-24 years of age are experiencing near 15 percent unemployment and the numbers are worse for teens at 25 percent unemployment. This means that young workers in large numbers are being denied labor market experiences, skills, and investments in human capital. A few more years of this trend could compromise a generation's ability to gain access to better, higher-paying employment in the future. Likewise, it subtly robs the economy of its prospects for growth in the future because poorer labor force quality is associated with lower productivity. Once beset with this trend, society will encounter still harsher trade-offs in trying to address the aforementioned litany of economic problems.
Thank you, Wade L. Thomas, Ph.D., for taking the time to answer our questions and sharing your knowledge and experience with our readers.