Who Can Shine a Ray of Hope on the Economic Crisis?

When the economy is bad, it is the time for economists to shine!  During the annual meeting of American Economic Association this year, economic recovery and market restructuring became the central topics among the attendees, among whom included five Nobel economic laureates.

According to Michael Mandel, a correspondent from Business Week who reported this meeting, economists had different views on the causes of the disaster -- the compensation schemes at some Wall Street firms to encourage risk-taking, BOD of those firms, or credit rating agencies, or even the oil shock. But Prof. Kenneth Rogoff of Harvard University said economists should be the first one to be blamed, because as the prognosticators for the nation’s economy, they ignored the early signs of credit bubble and argued that it was sustainable!

Under the current circumstance, most economists expressed their strong support for President Obama’s stimulus plan, acknowledging that is an essential remedy to cure the problem. Yet, they have diverging ideas about how this chunk of money should be spent. Some proposed the government could distribute a half-trillion dollars’ worth of vouchers to consumers in order to encourage consumer spending; some suggested government should reduce tax and increase spending by upgrading the infrastructure, which had already been included in the 825 b. stimulus plan.

Right now, Republicans and Democrats are still arguing on where such an economic recovery plan should focus on: tax cut, job creation or spending. As Congress is going to vote this week, let’s cross our fingers and hope that the right decision will be made! IMF Chief Economist Oliver Blanchard has predicted optimistically that with the right policies, “within a year we will have turned the corner.”