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How well is the administration handling the problem? According to economist Jeffrey Sachs in a Financial Times November 10 op-ed, "Obama has lost his way on jobs." Its "stimulus policies are not well-targeted. The Republican alternatives are even worse. Both sides" miss the key point - "the US economy needs structural change that requires a new set of economic tools."
Boosting consumer spending by near-zero interest rates and temporary incentives won't work. "During the previous bubble, (consumers were) encouraged to over-borrow. Recreating a new bubble is like offering one more drink, on the government's account, to overcome a mass hangover. With budget deficits of about 10 per cent of (GDP), government spending needs to be far more consequential than temporary boosts to consumer spending."
Republican strategy is even worse - tax cuts like they always propose for all problems and mostly where they're not needed. Sachs cites critical underfunded areas:
"roads, rail, clean energy, science and technology, diplomacy, international disease control, space, education, job training, water, transport, courts, poverty relief, homeland security, conservation, (and) climate adaptation." His long-term solution is three-fold:
-- "promote greater exports" through a cheap dollar and "expanded government support for export financing;"
-- massive education spending and job training, especially for youths and the less-skilled; and
-- spur investment "in areas of high social return that are currently blocked by the lack of clear policies;" one example - conversion to a low-carbon economy; numerous others as well going unaddressed.
Obama "has lost the economic initiative....Move now, Mr. President, or we will spend our time digging out of the next consumer bust and (end up) buying our technology from China."
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