“austerity without a strategy for vigorous economic growth is a recipe for failure”

How long ago was I shrieking this….

Weekly Standard:

Washington is overflowing with tax reform policies, proposals to bend the cost curve of entitlements, and ideas for smart infrastructure spending. There even seems to be a beneath-the-surface bipartisan consensus to move forward on these items, which probably won’t happen short of a stock market crisis that forces Congress to act.

Yet these reforms may not be enough. Policymakers also need to reform today’s slow-to-lend, too-big-to-fail banks. Here’s an important question: Should governments and central banks continue to try to prop up the value of the assets on bank balance sheets even though those values are unsustainable? This losing battle has already contributed to global public debt-to-GDP ratios that boggle the mind. We may be saving our banks, but we’re losing our economy.

Like a giant bow wave building up on each side of the vessel, the growing debt is threatening to swamp the entire world economic ship. A feeling of helplessness has taken hold at the precise moment policymakers need to be audacious. The numbers behind presidential candidate Herman Cain’s 9-9-9 plan may not add up, but his gut instinct is on the mark. America needs radical reform on the issues of both growth and debt.

David M. Smick, chairman of the macroeconomic advisory firm Johnson Smick International, is the founder and editor of the International Economy magazine.

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