In his latest post Scott Sumner discussed The 2018 Joint Economic Report by the Joint Economic Committee that analyses some of the causes the slow pace of economic recovery after the financial crisis in 2008, and includes some discussion of monetary policy issues. I followed the link to the report provided and read through the first few chapters, and I found this report to be both moving, given my passions regarding the experience of the American lost decade, and shocking for what it says and doesn’t say.
I do not wish to come across as ungrateful, but the structure of the report document makes it difficult to discern the message being conveyed. The first chapter lists these bullets as the cause of the slow recovery:
- Economic dynamism—including business formation and labor market “churn” (job turnover and relocations)—declined sharply after the recession.
- Many U.S. multinational corporations moved their headquarters and earnings to more favorable overseas tax jurisdictions.
- Weak domestic wage growth and government policies discouraged labor force participation.
- The aging of the population naturally slowed economic growth, which previous polices failed to counteract.
I suppose to people who are more involved with the supply side, supply side issues are perhaps what they understand like nobody else. It’s not to say that these weren’t factors. But I wouldn’t go so far as to say the problem is even 50% supply side in the face of suboptimal demand because allocation choices are made on the basis of obtainable potential, and being stuck in a world with a soft-cap on NGDP that has bent the output trend down represents a factor of risk that may not ordinarily be present.
Chapter 2, however, lists these as alternate views of the cause of the slow recovery
- Demand-side constraints – goes into considerable discussion about the conduct of monetary policy
- Legislative issues related to IOER
- Supply-side constraints – discusses lowering the bar on potential output, productivity, lack of bank lending
If these are alternate views of the cause of the slow recovery and the first chapter is about the “accepted” view of the cause, while the alternate view is down in print, this doesn’t make for the document worthy of celebration I imagined it would be. I suppose that I should recognize the importance of it being in the document, which is much better than being completely overlooked. But I can’t help getting the feeling of hemming and hawing here, a lack of a willingness to put the stake in the ground and say, “Never again,” that puts a big bright question mark on its meaning.
The pessimist in me is screaming that it’s simply lip service. The more patient part is saying, “Let go and let God.”