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<DIV class=timestamp>October 10, 2011</DIV>
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<H1><NYT_HEADLINE version="1.0" type=" ">This Time, It Really Is
Different</NYT_HEADLINE></H1><NYT_BYLINE>
<H6 class=byline>By <A class=meta-per title="More Articles by Joe Nocera"
href="http://topics.nytimes.com/top/news/business/columns/josephnocera/?inline=nyt-per"
rel=author>JOE NOCERA</A></H6></NYT_BYLINE><NYT_TEXT>
<DIV id=articleBody><NYT_CORRECTION_TOP></NYT_CORRECTION_TOP>
<P>The title of the white paper is, admittedly, a mouthful: “The Way Forward:
Moving From the Post-Bubble, Post-Bust Economy to Renewed Growth and
Competitiveness.” It was commissioned by the New America Foundation, which hoped
that it might “re-center the political debate to better reflect the country’s
deep economic problems,” according to Sherle Schwenninger, the director of the
foundation’s <A href="http://growth.newamerica.net/dashboard">Economic Growth
Program</A>. Its authors are Daniel Alpert, <A
href="http://www.westwoodcapital.com/ourpeople/daniel-alpert/">a managing
partner of Westwood Capital</A>; Robert Hockett,<A
href="http://www.lawschool.cornell.edu/faculty/bio.cfm?id=34"> a professor of
financial law at Cornell</A> and a consultant to the New York Federal Reserve;
and <A href="http://www.roubini.com/">Nouriel Roubini</A>, who is, well, <A
href="http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?pagewanted=all">Nouriel
Roubini</A>, whose consistently bearish views have been consistently right. It
is scheduled to be released on Wednesday. </P>
<P>I don’t know that anything at this point could re-center the political
debate, so unyielding are the two parties. But as Congress prepares to take
steps, through<A
href="http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/10/09/MNLD1LFFM8.DTL">
the deliberations of the already deadlocked supercommittee</A>, that will likely
further wound our ailing economy, “The Way Forward” ought to at least give our
politicians pause. </P>
<P>Its analysis of our problems is sobering. Its proposed solutions are far more
ambitious than anything being talked about in Washington. And its prognosis, if
we continue on the current path, is grim. “Unless we take dramatic steps, it
will be <A
href="http://www.npr.org/templates/story/story.php?storyId=88156284">Japan all
over again</A>,” says Alpert. “Continuous deflation, no economic growth, in and
out of recessions. And high unemployment.” Adds Hockett: “It will be like the
economic version of chronic fatigue syndrome. A low-grade fever all the time.”
</P>
<P>The paper’s central premise is something I’ve been hearing from Alpert for
more than a year now: this time, it really is different. What he and his
co-authors mean by that is that the bursting of the debt bubble three years ago
was not just a severe example of the ups and downs that are an inevitable part
of American capitalism. Rather, it was the ultimate consequence of the modern
global economy. Chief among the changes that have taken place is the integration
of China, Russia, India and other countries into the global economic mainstream.
The developed world once had maybe 500 million workers. Today, say the authors,
we’ve added another two billion people to the global work force. </P>
<P>That change alone has had a great deal to do with the stagnant wages, income
inequality and the oversupply of labor in America that was masked by rising home
prices and access to credit. The bursting of the bubble exposed how much the
American economy depended on cheap credit. Now that the curtain has been pulled
back, cheap credit alone can’t fix our problems. The country is in a
deflationary cycle that is very difficult to get out of: as wages decrease (or
more workers become unemployed), people become afraid to spend. Assets like
homes drop in value. Businesses react by lowering prices and laying off yet more
workers — which only triggers a new round of deflation. The only thing that
doesn’t change is the unsustainably high debt that was accrued during the
bubble. </P>
<P>How can we break this cycle? Like most mainstream economists, Alpert, Hockett
and Roubini roll their eyes at the calls for immediate government deficit
reduction, which led to the creation of the supercommittee. Reducing government
spending in the short term will only make things worse. </P>
<P>Instead, they believe that this is perhaps the best time in recent history
for the government to take on a sustained infrastructure program, lasting from
five to seven years, to create jobs and demand. “Labor costs will never be
lower,” says Hockett. “Equipment costs will never be lower. The cost of capital
will never be lower. Why wait?” Their plan calls for $1.2 trillion in spending —
not all by the government, but all overseen by government — that would add 5.2
million jobs each year of the program. Alpert says that current ideas, like tax
cuts, meant to stimulate the economy indirectly, just won’t work for a problem
as big the one we are facing. Indeed, so far, they haven’t. </P>
<P>Their second solution involves restructuring the mortgage debt that is
crushing so many Americans. It is a complex proposal that involves, for some
homeowners, <A
href="http://homebuying.about.com/od/financingadvice/qt/0407BridgeLoans.htm">a
bridge loan</A>, for others, a reduction in mortgage principal, and, for others
still, a plan that allows them to rent the homes they live in with the prospect
of buying them back one day. </P>
<P>Finally, they call for a “global rebalancing,” which includes a radical
change in the current dysfunctional relationship between creditor and debtor
nations, and even a new global currency that would be administered by the
International Monetary Fund. </P>
<P>It is impossible to do justice to “The Way Forward” in this space. It is rich
in supporting data, deeply nuanced, with as clear-eyed a view of our economic
predicament as I’ve ever read. Though it is not exactly beach reading, by
academic standards it is quite accessible. </P>
<P>You can find it at <A
href="http://newamerica.net/publications/policy/the_way_forward">http://newamerica.net/publications/policy/the_way_forward</A>.
You should read it — even if your congressman doesn’t.
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<DIV><FONT size=2 face=Verdana>_____________________________</FONT></DIV>
<DIV><FONT size=2 face=Verdana>Wayne A. Fox<BR><A
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