PBS’s “McLaughlin Group” (www.mclaughlin.com) remains the best political discussion of the week. John McLaughlin has the chair, with three regular guests and one visitor. This week’s program was particularly good.
The first item discussed was the US economy. The program began with President Obama lauding the accomplishments of his Administration in this area. Economist Robert Gordon of Northwestern University was then quoted.
Whereas the CBO (Congressional Budget Office) predicts an average growth rate of 2.1% over the next ten years (down from the 3.5% averaged since World War II), Professor Gordon predicts 1.6%. The reasons he gives are that the baby boomers are leaving the work force; new hires will not fully replace them, so less will be produced. He also predicts the national debt will increase to 87% of GDP by 2024, 9% higher than the government’s estimate.
Robert Samuelson of the Washington Post wrote:
“If he’s right, this could be our next nasty economic surprise . . . the prospect now is for years of modest to, in Europe, non-existent growth. How will political systems cope? Will class warfare intensify as groups battle harder for bigger shares of a stagnant pie? Without an expanding economy as a shock absorber, will racial, ethnic, generational and ideological conflicts worsen? . . . prolonged sluggishness would turn the economy into a zero-sum game, where one group’s gain is another’s loss. This is no formula for social peace.” (Washington Post, 9/22/14).
This all led to an interesting discussion. “Are we in for a decade of political and social unrest?” asked host John McLaughlin. Conservative Pat Buchanan’s response was: “More than a decade . . . the share of the labor force that is working is dwindling . . . the baby boomers were the best skilled and best educated generation ever . . . Millions of folks are coming in from the Third World who lack the skills, education, and abilities that are needed.”
Liberal Eleanor Clift predictably felt that the exact opposite was the case and that the economy is all set for a wonderful decade. She added that “the dollar is the indispensable currency” – on this last point, she was correct.
Journalist Tom Rogan (National Review and The Daily Telegraph) felt that “the biggest issue is the national debt.” Rising debt threatens social security and Medicare.
Pat Buchanan pointed out that “real wages have been stagnant since 1974.” Mort Zuckerman (publisher of US News and World Report) added: “In the last half a dozen years, real wages have gone down by about $4,500 per year.” Buchanan felt that “neither party will deal with social security, Medicare and Medicaid,” government programs whose costs keep rising way above the annual rate of growth in the economy.
Zuckerman mentioned a recent poll that showed that “78% of Americans have no confidence that Washington can ride to their rescue.”
Host John McLaughlin quoted a recent poll that showed 58% of Americans feel the need for a third party. Eleanor Clift quoted Shakespeare to sum up the attitude of most Americans: “A pox on both their houses,” a condemnation of both political parties. Pat Buchanan observed: “Our system is breaking down.” Mort Zuckerman added that ‘we’ve had five years of low growth.”
This is clearly not a rosy picture of America’s future.
The same day the McLaughlin Group was recorded, The Economist was working on a leader warning of the danger of deflation, the worst thing that can happen to an economy.
Western countries have had low inflation rates for over a decade now.
Falling prices at first seem benign but can soon turn deadly. At the time of writing, gas prices in the US are falling, which is making everybody happy. But a fall in gas prices means that demand for oil is dropping and this means that economies are slowing down. This will increase unemployment, which will mean a further drop in demand, which will lead to more unemployment, etc. And so it goes on in a downward spiral.
Some countries are already showing the first signs of deflation. Italy, Spain, Greece, Sweden and Israel are five western countries where inflation is below zero. Deflation can easily follow, warns The Economist in “The Dangers of Deflation” (10/25). A twisting of the title of Edgar Allen Poe’s famous 1842 short horror story, “The Pit and the Pendulum,” The Economist’s sub-title is “the pendulum swings closely to the pit.”
The world is dangerously close to a deflationary downward spiral.