Friday, January 28, 2011

State of the Union

I listened to the State of the Union speech the other day, so I could be prepared for a brief WPR interview. The interview went horrible. I never got a chance to talk about what I thought the President did poorly. Joy Cardin, continues to believe the President has the ability to do something to create jobs. Despite the fact that I keep saying there is nothing more he nor any public official can do, she refuses to believe me. I think my profession is doing poor job of talking about jobs and "job creation".My views aren't as extreme as Casey's, but with each passing day his arguments look better. People should stop reading Krugman and start reading Cowen (and here).

Anyhow, Here were the points I wanted to make.

What the President did well:

Of course he is a great speaker, so that goes without saying. Yet I feel compelled to say it. Apparently we are all supply-siders now. He talked about the things government might be able to do to promote future growth. These are not short run fixes for the economy, but long run strategies for enhancing supply side growth. He talked about innovation, education and infrastructure. Of course the proof is in the details, as many things can be done in the service of these ideas that are wasteful, but many things can be positive for economic growth. For example a bad idea that addressed innovation would be subsidizing start up companies. A good idea would be improving the patent system. What about prizes?

What the President did poorly. He used the competition metaphor too much, and too literally when talking about the economy. Its one thing to improve our performance in education by improving our basic math and science instruction, to "compete" with China and Korea, but its still another to believe we need to "win" as if losing makes us worse off.

Economics is not a basketball game, its not zero sum. China's rapid economic growth does not "steal" jobs from us. People listening to that speech might be left with that impression.

Update: Krugman and I do seem to agree on the poor choice of the competitiveness metaphor.

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