Does the Election Really Matter for Economic Policy?

Posted by: Michael Mandel on November 10

Take a look at my new cover story, “What the Election Won’t Change”

Comments?

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Reader Comments

Brandon W

November 10, 2006 09:12 AM

Hi Mike,
I actually read your story yesterday. Your article is well-written and I think it is critical for Americans to understand that the game has changed and the US Government is no longer the force it once was in economics. Most importantly, the Democratic leadership needs to understand this so they can make the best policies possible (and temper unrealistic expectations). The point you make about R&D is true, but frankly, scary. We may still lead in Research (original discovery) but we are falling way behind in Development (turning that discovery into a thing to be sold and add to the economy). With increasing shortfalls in research money at our universities, we may find ourselves falling behind in research as well.

I do have one quibble regarding your perspective on fiscal deficits. From a purely econometric point of view you are likely correct that a lower deficit *shouldn't* make much difference. However, markets (and economies) don't always make so much sense. For example, much of the flow between the dollar and gold as reserves is purely psychological. What "feels" right; what do we have "faith" in? Our entire economy is based on fiat currency which only has value because other people have faith in it. Fiscal irresponsibility on the part of our government reduces faith in our currency and, by extension, our economy.

david foster

November 10, 2006 05:48 PM

Looks like an interesting article, as always. I do think the election results have some potentially-malign results for economic growth over the longer term:

1)Lawsuit fever--the Democrats are unlikely to do anything to make irresponsible litigation less frequent, and I think this has serious negative impacts on productivity

2)K-12 education--most Democrats (there are a few noble exceptions) have shown little interest in serious reform of the schools: they are happy to throw more money at them, but unwilling to challenge the dominance of the educational establishment, with its bizarre theories and insistence on "education" degrees for all teachers.

3)University education--Pelosi talks about making college "more affordable"...I doubt if her ideas for this involve any reduction in the large amounts of money that are wasted by institutions of higher education. Higher ed has become a big enough industry for its productivity to matter.

Lord

November 11, 2006 02:24 PM

Some of the changes that should be made are to benefit citizens rather than companies and workers rather than businesses. Since these are much less mobile, the benefits will fall much more here.

While deficit reduction is normally good, I don't think we should be afraid of debt that can benefit us and enhance our productive resources like that above. Much larger borrowings may be necessary to force floating exchange rates. Our control being diminished means we must act more boldly even though the result of a mistake may be greater.

Joe Cushing

November 12, 2006 12:17 PM

Competition has always improved the quality of our lives. This is we have the FTC. Now we have competition on an even greater scale. This can only mean people will have to get better and there will be a higher quality of life for everyone—well, most of us.

aa2

November 15, 2006 11:59 AM

Great and interesting point that the trade is bigger then the federal government now!

I view America's achilles heel economically as so few young learning engineering. We are quite strong on science, which makes the back bone of the R&D spending.

But as Brandon pointed out we don't take those discoveries and turn them into products very well. But that is what engineers do, they use the discoveries in science to help mankind. The US only graduates 60,000 engineers, while countries far smaller like Germany graduate more.

The Democrat and Republican plan of getting people more educated doesn't mean anything unless the education is something useful. We don't need more lawyers, psychologists, sociologists, mba's, african history majors.. We need more people who are taught the laws of nature, and mathematics.

Mike Mandel

November 15, 2006 12:46 PM

But here's a question...have engineers become a global commodity these days? That is, if we train more people in science and engineering, are we training them for an occupation with intense global competition?

Brandon W

November 16, 2006 08:53 AM

Mike,
You make a good point about the commoditization of engineers. IT employees have seen the effect of this directly in the past 5 years, and Frans's comment on your "Musical-Chairs Economy" post demonstrates this. I have personal experience in that I was an upper-tier tech until 2000 when I was laid off. I went 6 months without finding employment. Finally, I caved and took a job selling satellite TV systems, then mortgage loans. To this day I don't make as much as I made in 2000, even with two new college degrees under my belt.

Are we really underemployed if this *is* the new status quo?

If this is becoming the status quo, how do we support 300 million people on $12/hr customer service jobs (or $8/hr retail service jobs)? People in innovation positions may well make a lot more, but there certainly aren't enough jobs at that level to maintain our standard of living across the economic classes. After doing a Master's degree in organizations, here is what I see:

The new organization is flat. Teamwork is the rule. Why? Because we have learned that all the knowledge - critical in a knowledge economy - that employees hold can be better extracted through teamwork. Fantastic, right? But here's the deal; employees are paid less because they individually matter *less*, yet the company is able to extract the employee's most valuable asset. In a knowledge economy, knowledge is the asset, and corporations are getting it for a screaming bargain. Those that own the assets grow increasingly wealthy and, as you point out in your article, corporate profits are almost to all-time highs. Sorry to get all Marxist on you. ;) However, I think we have to seriously consider this issue if we're to create jobs that can sustain our standard of living. If not, the majority of people are going to see an ever decreasing standard of living. We have to make our choice on this and we have to make it soon.

Mike Reardon

November 17, 2006 09:30 PM

I see all politicial and business support for high end services like engineering and r&d innovation only being politically correct public declarations on past high-end intellectual products. The fact is major businesses now gain these services in the international market as a commodity at that lower cost they offer. Still demanded engineering and r&d competition are now only intellectual crop subsidies for the major universities. The push for massive investments into those intellectual commodity products, is not in our best intrest. Still giving politically correct public declarations for these high end services, is exactly like politicians not admitting or accepting the impact of Wal-mart's complete product coverage for almost all consumer products at there lowest commodity prices. We need to work out of the untruth that only Best Buy and tourism is all that is left. We are now investing more and more into health, so why not ask for more economic support for medical schools for the near future. Health coverage is now a better subsidy for those same major universities.

Thank you for your interest. This blog is no longer active.

 

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Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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