“Economic Miracle”?

Robert Samuelson, I think, talks sense on economic matters, so I enjoy his weekly comumn in the Washington Post. In his op-ed of April 13th he analyzes Barack Obama’s “vision for America’s 21st-century economy” and finds it wanting:

We will lead the world in “green” technologies to stop global warming. Advancing medical breakthroughs will improve our well-being, control health spending and enable us to expand insurance coverage. These investments in energy and health care, as well as education, will revive the economy and create millions of well-paying new jobs for middle-class Americans.

What Obama proposes is a “post-material economy.” He would de-emphasize the production of ever-more private goods and services, harnessing the economy to achieve broad social goals. In the process, he sets aside the standard logic of economic progress.

Since the dawn of the Industrial Age, this has been simple: produce more with less. (“Productivity,” in economic jargon.) Mass markets developed for clothes, cars, computers and much more because declining costs expanded production. Living standards rose. By contrast, the logic of the “post-material economy” is just the opposite: Spend more and get less.

Consider global warming. The centerpiece of Obama’s agenda is a “cap-and-trade” program. This would be, in effect, a tax on fossil fuels (oil, coal, natural gas). The idea is to raise their prices so that households and businesses use less or switch to costlier “alternative” energy sources such as solar. In general, we would spend more on energy and get less of it.

The story for health care is similarTogether, health care and energy constitute about a quarter of the U.S. economy. If their costs increase, they will crowd out other spending. The president’s policies might, as he says, create high-paying “green” or medical jobs. But if so, they will destroy old jobs elsewhere. Think about it. If you spend more for gasoline or electricity — or for health insurance premiums — then you spend less on other things, from meals out to home repair. Jobs in those sectors suffer.

The prospect is that energy and health costs may rise without creating much gain in material benefits. That’s not economic “progress.” Rebating households’ higher energy costs (as some suggest) with tax cuts does not solve the problem of squeezed incomes. Given today’s huge and unsustainable budget deficits, some other tax would have to be raised or some other program cut.

But I’ll stop quoting—read the whole piece, I think it makes a lot of sense.


2 Responses to ““Economic Miracle”?”

  1. Brian K Says:

    Samuelson is oversimplifying. We need absolutely zero new technological breakthroughs to cut the average American’s energy use in half or more through energy improvements to our buildings. It’s easy stuff but yes it requires investment. And energy costs will rise anyway regardless of where it comes from, making your investment pay for itself over time. You won’t pay more if you need less and can buffer yourself against rising costs. Money not spent to condition your leaky wasteful home can be spent gaining whatever “material benefits” Samuelson thinks we should be focused on.

  2. PJK Says:

    Thanks for the feedback, Brian. I agree that there’s a lot we can and should do which would cut wasteful energy use. But, there’s no magic in “green” jobs, and I think we need the equivalent of the “green eyeshade” people to play Scrooge in these matters.

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