Robert Samuelson looks to Japan, too. He does not comment on the similarity between the current stimulus bill, which President Obama will sign tomorrow, and the stimulus Japan tried. He does, however, comment on Japan’s inability to get its inefficient domestic economy on the right path, and so achieve a sustainable recovery.
Since the early 1980s, American economic growth has depended on a steady rise in consumer spending supported by more debt and increasing asset prices (stocks, homes). Just as the mid-1980s signaled the end of Japan’s export-led growth, the present U.S. slump signals the end of upbeat, consumption-led growth. But its legacy is an overbuilt and overemployed consumption sector, from car dealers to malls. The question is whether our system is adaptive enough to create new sources of growth to fill the void left by retreating shoppers.
So why does the stimulus bill try to prop up the “overbuilt and overemployed consumption sector” instead of easing the structural transition necessary for future growth? Fiscal policy should be the anesthetic to make reform less painful, not morphine to put off reform.
