US Economy heading into a Lost Decade

For the US and UK economies, a lost decade looms | Dean Baker

If economic policy was driven by economic reality, then there would be a serious debate in Washington right now about possible routes for boosting demand. This would include calls for more fiscal stimulus, more aggressive monetary policy and a reduction in the value of the dollar in order to boost net exports.

Unfortunately, none of these items are on the table. The debate in Congress is over the best way to reduce the deficit – in other words, how much and how quickly we want to slow growth further. At his press conference last week, Federal Reserve Board Chairman Ben Bernanke essentially swore off any further monetary stimulus and expressed his willingness to fight inflation that is not there. And no one in Washington seem seems to understand that amount we import is affected by the price of imports, so lowering the value of the dollar never enters the discussion.

This is a great recipe for continued slow growth and high unemployment. And few in Congress or the media seem to give a damn.