Economy Not Good, But Not Quite as Bad Either
Economist Todd Buchholz thinks things aren’t quite as bad as we think when it comes to the economy. No cause for celebration, for sure, but not as doom and gloom as some of the media headlines scream.
As a former director of economic policy for the White House from 1989 to 1992, he says today’s recession just isn’t as bad as some the U.S. has experienced in the past.
“Things are stagnant but we are certainly not falling off a cliff like in the ’82 recession and certainly not like the Great Depression,” Buchholz told an audience of Southern legislators Saturday at the Southern Legislative Conference’s Annual Meeting in Oklahoma City. “As long as the paychecks go out, we won’t fall off a cliff.”
In the last recession of 2000 and 2001, the Federal Reserve hiked rates too much, OPEC tightened the noose and the value of the Euro fell too far, Buchholz said.
But today, the Federal Reserve has slashed rates and redefined to whom it will lend money—that’s going in the right direction—Buchholz said.
“The difference between the last recession and today is the value of the dollar is weak,” he said. American exports are on fire, particularly in the agriculture area, he said, “that’s what’s keeping us out of a deep depression.”
And the U.S. won’t slip into economic times akin to those of the 1970s, Buchholz predicts. Unlike the labor strikes of the 1970s that drove up inflation, today’s organized labor does not have the muscle to drive negotiated 11 percent plus increases in pay year over year, he said.
“Labor does not have the power that it used to.”
That said, we certainly live in a different world today, according to Buchholz. “The building blocks of the world economy as shifted,” he said. Today’s world is hyper-competitive and driven by the record-setting speed of business.
He likes to say that we live in an era of “shockwaves of change” where the middle class is being squeezed as if by a pair of chopsticks—while wages aren’t getting any higher, food prices are increasing.
But the one bright spot is the opportunity this near-recession, as he called it, creates. Opportunity is literally knocking at the door, and according to Buchholz, “when you have economic turmoil you have to be more competitive than the others.”
So, in effect, the value of the U.S.’s economy is not in the weight of goods but rather comes from the human mind, he said. It’s the ideas that are valued in his concept of “the light economy.”
“We are in a race for IQ points,” he said, and the way to get out of the muck is to think ourselves out—being more creative and more innovative than ever. And states are leading the way in the lab of changes, he said, prompted by a question from a southern legislator in the audience.
“It is certainly the state legislatures that have demonstrated more courage,” he said, pointing out President Bush’s low approval ratings and Congress’ even lower approval ratings. “I would hope that the American people would recognize that.”
On a side note, Buchholz holds education as a necessary economic driver, and perhaps the single most important issue on which states should focus .
“Education is the most important long-term issue and I am not convinced that our states or we as a country are doing what we can to keep our kids competitive,” he said. “We are the Jamaican bobsled team of education.”
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