Gideon Rose speaks with Martin Feldstein and Alan Binder about the fiscal cliff and deals to avert it.
Although the U.S. economy is no longer in a recession, recovery has been painfully slow. The outlook is still bleak: Congress is likely to cut spending and raise taxes, while the Fed is in no mood to lower interest rates.
This stimulating collection is built around Blinder's strong and much-debated thesis that within two decades, 30-40 million U.S. jobs, mainly those in the services industries that require no direct contact between the provider and the customer, could be sent offshore.
As the financial crisis continues, the U.S. Congress is considering a bill that would jeopardize the independence of the Federal Reserve. This is a shame. Monetary policy should be protected from congressional politics.
Economists who insist that "offshore outsourcing" is just a routine extension of international trade are overlooking how major a transformation it will likely bring -- and how significant the consequences could be. The governments and societies of the developed world must start preparing, and fast.
The economic conflagrations that lit up the world throughout the last half decade sent a very clear message: There are fatal flaws in the global financial architecture. The Bretton Woods system was designed for a very different world. The IMF, part schoolmarm and part firefighter, no longer plays either role well. Too often, it ignores the real victims and makes crises worse. The system must be redrawn to stabilize markets and head off panics before they spin out of control. Herewith a simple, eight-point plan for such reforms that uses existing institutions and respects current notions of national sovereignty.
Those who say big government is the problem have it wrong. The real problem is that government is pushed and pulled by interest groups and partisan politicking, often at the public's expense. Washington could learn from independent agencies like the Federal Reserve. Shift responsibility for things like tax policy from the politicians to the experts; besides knowing more, they work in a politics-free zone. Tossing the ball to the technocrats won't weaken democracy -- Congress can always take it back -- but it will produce better policy.