"The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years of the last decade. Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment. And once you realize that the overhang of private debt is the problem, you realize that there are a number of things that could be done about it.
For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners. We could try to get inflation back up to the 4 percent rate that prevailed during Ronald Reagan’s second term, which would help to reduce the real burden of debt."
The "core" of the U.S. economic problem is debt? I disagree. Debt is only one of various maladies contributing to unemployment. And I certainly don't think that ringing up more debt in order to send unemployed computer programmers, or anyone else for that matter, to repair potholes is going to remedy the ailment.
Dr. Krugman fails to mention high energy costs, which are literally slowing the American economy to a snail's pace and destroying the U.S. balance of trade. What can be done to bring energy costs down? Plenty.
The U.S. is blessed with bountiful quantities of oil shale that can eliminate dependence upon foreign oil. Yes, in situ extraction can pollute ground water, but there are also solutions to this danger. An entire industry, requiring both high and low tech workers, can be spawned on American shores. (More on oil shale - I am personally acquainted with the subject - in a subsequent blog entry.)
Dr. Krugman also doesn't mention tariffs. Over past decades, U.S. manufacturing has been destroyed by cheap imports from China and Pakistan. Although Beijing and Islamabad won't be pleased, perhaps it's time to even the playing field by increasing tariffs or offering tax incentives to U.S. manufacturers in order to improve their competitiveness.
Finally, Dr. Krugman doesn't mention technological innovation. Technological innovation is a double-edged sword, which creates and destroys jobs. But without technological leadership, the U.S. economy is destined to be eclipsed, and such supremacy must be ensured, thereby also ensuring productive job growth.
A new W.P.A. program, sending overweight middle-aged persons to repair roads? It might cure obesity, but it won't make a dent in unemployment.
If wealth was a bubble, so was the high employment. Wealth proved to be phony. So there is no real wealth to create new jobs, and no consumers to pay for the services. The country does not need programmers, scientists because it is, essentially, poor. It can not pay for such a luxury as research and development any more. Even filling the potholes is problematic. Programmers do not even get a chance to participate in road repairs, because there are enough of qualified constructors out of work.
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