I was at a dinner for my old Foreign Serice class Sunday where I heard two kinds of comments that gave me some pause. Some said the US economy had gotten too large and we were living beyond our means. For these the best remedy for the current economic plight would be for the economy to contract to something more in line with what we can afford. On the same path, but somewhat different, were those who were skeptical of the President’s efforts to get us out of the mess with increased government spending. They do not want to pump up demand at this point since excess demand is what got us into this position.
As I have said before I do not get into arguments about what constitutes the appropriate level of consumption. I define economics as the science of satisfying the perceived needs of the people with perceived being the operative word. One man’s necessity is another’s excess.
I do support President Obama’s multiple efforts to revive the economy with one exception, I do not support using public funds to improve home owner’s equity. This is the idea behind the plan to force write downs of mortgages to lower present values of property. Yes, help stop foreclosures, but no, do not use public funds to improve an individual’s property sheet.
I leave it to others to determine the “correct amount of consumption.” However, I fully support the President’s efforts to bring the economy back to its previous level and go beyond that.