Here is how to recognize a one-trick pony when it comes to economics: Look for the numbers.
It is that simple.
When President Barack Obama says he is going to solve the unemployment crisis with a $787 billion stimulus bill, the first question a wary economist would ask is: What happens when the money runs out?
In Europe last week, finance ministers and then heads of states gathered to outline a strategy that was all numbers. The European Financial Stability Facility would be increased in financial firepower from $350 billion to $1.4 trillion, as if that would put a cork in a continent worth of debt problems. The 70 largest banks in Europe, the strategy says, would be forced to raise $100 billion in capital to cushion themselves against a potential economic downturn. The bailout program for Greece would be expanded substantially, but at the same time nominally – just bigger numbers. Granted, a lot of bucks are involved, but burning dollars does not a long-term strategy make. By definition, burning dollars is a temporary affair.
The game-changers are being pushed individually, one national capital at a time, as lawmakers cut spending or raise taxes. Those are long-term decisions, or could be. If Greece strikes oil, all bets are off. Barring that, if Greece raises its retirement age, that has long-term implications.
Similarly, as all eyes swivel from Brussels to Washington, the realization must dawn seriously on politicians and the populace that the United States is living seriously beyond its means. If the Joint Select Committee on Budget Reduction on Nov. 23 says the defense budget should be slashed, then it has to be concluded that however politically good or bad or indifferent it might be to send armed forces to Afghanistan or Iraq, it was an economic fantasy to give it a try. "Rich and powerful" needs to be toned down a bit. How about "Wealthy and affluent"? Or how does "Well off and influential" sound?
Lawmakers in Washington should be debating the retirement age from scratch. Life expectancy having increased since the Social Security system was put into place, are we forcing individuals to years of fixed incomes and poverty or just interminable boredom? Some want to retire at age 65; for others it is a death sentence. On the other hand, nobody should be saying only the rich and powerful can retire while those in poverty must keep working.
Economics is all about priorities and relationships. The so-called "super committee" will re-order U.S. priorities with a hatchet, balancing defense against social programs. Through federal contracts and jobs in the military, it should not be forgotten, however, that defense is a social program. When the military closes a base in your neighborhood, the understanding of that rings true. On the local level, not many say, "there goes our ability to defend ourselves." What they say is, "there go our local jobs."
For members of the supercommittee it is the opportunity of a lifetime. If they ran for office in order to straighten out the country's priorities and relationships, handing them the nation's budget direction for the next 10 years is about as good as it gets.
In international markets Monday, the Nikkei 225 index fell 0.69 percent and the Shanghai composite index in China dropped 0.21 percent. The Hang Sen index in Hong Kong lost 0.77 percent and the Sensex in India fell 0.56 percent.
In Australia, the S&P/ASX 200 lost 1.27 percent.
In midday trading in Europe, the FTSE 100 index lost 1.23 percent while the DAX 30 in Germany slipped 1.88 percent. The CAC 40 in France dropped 1.65 percent and the Stoxx Europe 600 index shed 1.12 percent.