Out of Control Policy Blog

The Economic Sky is Not Falling

UCLA economist Lee Ohanian has an excellent article in the Wall Street Journal online on the health of the US economy. While the economy is not humming along at break neck speed, productivity and GDP are still healthy. More importantly commercial and industrial loans are up 9% and 30-year fixed rate mortgages are available for those with good credit histories.

President Bush argued that the passage of the Treasury rescue plan was necessary to prevent the U.S. from entering a severe downturn. Yesterday, the Federal Reserve announced it will begin buying commercial paper to, in the words of Fed Chairman Ben Bernanke, help "financial firms cope with reduced access to their usual sources of funding."

Both of these actions were designed to restore confidence in our financial markets. Unfortunately, they have created considerable fear about the underlying strength of the U.S. economy. This panic has roiled stock markets and led to comparisons between today's crisis and the Great Depression of the 1930s.

The Treasury plan and the Fed's emergency measures are certainly useful. However, their main contribution is not preventing a Depression-like scenario from evolving out of the current financial crisis. The real economy is a great deal stronger than many believe.

What would really boost the economy, he continues, is boosting the number of high skilled workers.

Samuel Staley is Research Fellow


« Fiber to Public Housing | Main | Can a small stone make… »




Out of Control Policy Archives