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Home Publications Blogs Beat the Press Fareed Zakaria: More Arithmetic Problems at the Washington Post

Fareed Zakaria: More Arithmetic Problems at the Washington Post

Monday, 29 November 2010 06:01

Where is Michelle Rhee when we need her? That's what readers of Fareed Zakaria's column on the economy must have been asking.

Mr. Zakaria comments that the stimulus was helpful, but then says that it is not the right medicine to boost the economy. He tells readers:

"In the real world, growth depends on real factors: the quality and quantity of education, work ethic, population profile, the quality and quantity of existing plant and equipment, business organization, the quality of public leadership (especially from the Fed in the U.S.), and the quality (not quantity) of existing regulations and the degree of enforcement."

This strikes me as the common-sense view of economics. We can push and pull fiscal and monetary policy all we want, but long-term growth depends on these broader and deeper factors.

Ironically, one policymaker who seemed to understand this was Barack Obama. Twelve weeks into his presidency he gave a speech at Georgetown University making the case for the long-term rebuilding of the American economy, away from an overreliance on debt and consumption and toward productive investment. Obama should have given 25 versions of that speech by now and relentlessly offered policies that expand on its basic focus on long-term growth."

Okay, Zakaria's wants more investment. That sounds good, but how much more does he think that President Obama's 25 versions of his Georgetown speech would prompt. In 2007, before the recession, investment in equipment and software were slightly less than 8 percent of GDP.

Private sector demand has fallen by close to 9 percent of GDP as a result of the collapse of the bubbles in residential and non-residential real estate. Roughly half of this decline is due to the end of the bubble driven construction booms and the other half is due to the loss of consumption that followed the destruction of close to $8 trillion of housing bubble wealth.

Does Mr. Zakaria really think that investment will double as a share of GDP in an environment where demand has collapsed. Mr. Obama can be a great speaker, but I think this one would exceed even his capabilities.

If only the people who wrote about economic policy for major news outlets had to know 3rd grade arithmetic we could be saved from having to deal with such arguments.

Comments (6)Add Comment
Supplysidus Ignoramus
written by izzatzo, November 29, 2010 7:27
Mr. Zakaria comments that the stimulus was helpful, but then says that it is not the right medicine to boost the economy. He tells readers 'In the real world growth depends on real factors:'

Patient: Doctor, every time I think about the economy and recession, all I can think of is the unemployed resources on the supply side. Do I have Supplysidus Ignoramus?

Doctor: Yes you do. I see a lot of it these days. It comes from reading journalists like Zakaria, Friedman and Samuelson who also have it, except theirs is genetic, like Type I Diabetes, not curable but treatable, where yours can be treated with diet, exercise and reading 'real' economics.

cant hide his ironic eyes
written by frankenduf, November 29, 2010 8:00
yeah yeah- obama also gave speeches about creating 1000s of green infrastructure jobs, which is also needed as stimulus, but turned out to be "just words" (im plagiarizing!?)
ps- yo isthatso- FYI type 2 has actually a stronger genetic predisposition- i know it's counterintuitive, but it seems that there are strong environmental triggers for type 1- eg the pima indians are @ 60% disposed for type 2- nobody's close to that for type 1- i would go on further, but ur closing tone makes me scared to correct u :)
written by Dr.Bill, November 29, 2010 11:32
I agree with Mr. Zakaria's common sense economics that the economic problems we currently face can only be solved by long term investment in education, work ethic and culture and the quality and quantity of regualtions. He also wrote a column in Time 11/15/10 about the deficit, a related problem, using similiar logic and rationality, rather than ideology, to make his arguement. Only by facing reality and mathematical facts, not party politics. I also agree that Mr Obama should use his position to make these arguments to the American People. We have real problems that will take real solutions to fix.

Other Imbalances
written by Milton Friedmaniac, November 29, 2010 12:17
Yeah, yeah, "more and better education" is always the solution to all society's problems. More education gets a person a better job, as a "symbolic analyst," so he or she can order a bunch of dumb humps around whilst running that productive hedge fund. Except, how many more hedge fund dickweeds do we need? And if everyone has a Ph.D. from MIT, who will be available to rip out those ugly old granite countertops in Ms. Hedge Fund's summer cottage and install those shiny-special new ones? Then too: what are we supposed to do with that half of the population with IQs below 100?
Likely Zakaria knows arithmetic, but Zakaria fails on Econ 101-level reasoning
written by anon, November 29, 2010 12:54
I don't see the point of heaving hyperbole in the face of Zakaria's blindness (deriving from devotion to dogma, limited intellectual capacity, lack of education, or whatever) to the real and tangible drivers at issue, e.g. lack of demand. I would wager Zakaria knows third grade arithmetic, but he appears to have topped-out at about a 10th grade level of understanding of reality. His prose appeals to a lot of people; and thus the ignorant narrative is amplified.
Long term investment in education
written by Paul, November 29, 2010 10:19
How about Federal loans to students at zero interest for higher education? Reduce unemployment and invest in our future.

No, not gonna happen; can't increase the deficit because balancing the budget is the road to prosperity, just ask FDR, circa 1937.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.