So the topic of conservative pundit David Frum's op-ed is what's wrong with Romney-Ryan, and it's definitely worth reading for that, but his explanation of the Great Recession and its aftermath is the most concise and on-target I've seen anywhere. I'd like to say Frum's observations are obvious, but apparently they are not, not by a mile, not even among some very smart people, because many persist in believing that our current economic malaise has been caused by government debt, or at least is somehow aggravated by government debt, rather than their acknowledging that fiscal deficits and public debt are symptoms of a down economy, not its cause. See here:
Americans assumed crushing levels of debt in the 2000s to buy expensive homes, homes they assumed would continue to rise in price forever. In 2007, household debt relative to income peaked at the highest level since 1928. (Uh oh.) When the housing market crashed, consumers were stranded with unsustainable debts, and until those debts are reduced, consumers will drastically cut back their spending. As consumers cut back, businesses lose revenue. As businesses lose revenue, they fire employees. As employees lose their jobs, their purchasing power is reduced. As purchasing power is lost throughout the economy, housing prices tumble again.Rinse and repeat.Since 2008, the debt burden on households has declined somewhat, partly because of increased saving, mostly because of mortgage default. But household debts have declined nowhere near enough, and the pace of household debt reduction is slowing.The result: slow recovery of the private economy, weak consumer demand, paltry job growth -- considerably offset by continuing job shrinkage in the public sector.
In other words, as I've been repeating over and over again (apparently talking to myself for all the good it's done), the Great Recession and whatever we're suffering now has been caused by a lack of aggregate demand, i.e. too few people ready & willing to buy stuff. And low demand is being aggravated by government at all levels cutting spending and public-sector jobs.
Tragically, neither Obama nor Romney-Ryan has really addressed that core problem, or proposed a credible, much less courageous, solution. Sadly, a vote for either ticket is a choice to muddle along.
By David Frum
August 14, 2012 | CNN
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