Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.
Summers' replacement must be an economist that will go along or an industry leader who can polemic an alibi or be excused for not knowing better. This person, if it is an economist, must soft peddle the limitations of policy tools the President likes.
Resurrecting America requires addressing structural impediments to growth-the gaping trade deficit with China and self-destructive corporate outsourcing hysteria, the sorry state of the balance sheets at the 8000 regional banks, and the reckless casino culture on Wall Street that is luring local governments into fiscal disaster just as it did homebuyers several years ago.
The Commerce Department reported the deficit on international trade in goods and services fell to $42.8 billion. That is less than the $49.8 billion registered in June, as a slowing U.S. economy dampened import demand and civilian aircraft shipments jumped. The latter is not likely to be repeated.
With thousands of young college graduates moving in with parents and returning Iraq-war veterans facing long-term unemployment, President Obama is scrambling for cover. Irresponsible spending, largesse for big banks and subsidies for a broken health care system have busted the budget and failed to create jobs.
Americans may be dissatisfied with the economy but don’t look for Republicans to sweep control of the House and Senate. Voters have good reason to be disenchanted with both parties.
Unemployment is stuck near 10 percent and deflation and a stock market collapse threaten. The Federal Reserve and Barack Obama are out of bullets. Near zero federal funds rates, central bank purchases of mortgage backed bonds and other securities, and a $1.6 trillion deficit have failed to revive the economy.
President Obama is seeking to double exports, through marketing programs and new free trade deals. However worthy those initiatives may be, doubling exports does no good if imports double too. By increasing the trade gap, more open trade policies would increase the drag on growth and jobs creation.