Morning Must-Read: Jared Bernstein: Is the Macro-Economy Really That Much of a Muddle?

Jared Bernstein: Is the Macro-Economy Really That Much of a Muddle?: “I come away from Bin Appelbaum’s (fine) piece in today’s NYT…

… scratching the old head…. It has been five years since the official end of that severe economic downturn. The nation’s total annual output has moved substantially above the prerecession peak, but economic growth has averaged only about 2 percent a year, well below its historical average…. Here’s a typology of the different views expressed in the piece, as I understand them: –The economy’s potential growth rate has been slowing down for a while.  Stuff happens…. –Bunk.  We’ll be fine…. –Sorry, but the fact is we’re going to be growing slower post-great-recession. But that’s because of the recession, or, more precisely, because of the policy mistakes we made that kept us down for so long that we’ve bent the trend. –Well, yeah… but if you can bend the trend you can mend the trend.  Aggressive policy to close gaps in output and jobs could at least partially reverse the damage. No one knows which of these is right, of course.  But would not a shave with Occam’s razor lead you to the last one?… So where’s the big, freakin’ puzzle here?  Investing in public infrastructure, helping the long-term unemployed with extended benefits or direct job creation, targeting the trade deficit to help our manufacturers, pressing on the fiscal and monetary accelerators–I know there are those who will disagree, but these are well-established and well-understood responses, or at least they used to be, to demand contractions, including the one that persists as we speak…. Of course, the constraints are political and I’ll immediately grant you that the politicians are more confused than the economists.  But granting the not-that-interesting truth that the future is uncertain, I simply don’t understand the apparent confusion about the present, including the necessary prescription to get back on track… even if we don’t know the precise measurements of that particular track.