Waiting for policymakers to care about the economy

Wealth financier Pete Peterson hosted a “summit” this week on debt reduction, and NPR described it this way: “American political heavyweights … met to tackle the biggest problem facing the nation: the massive public debt.”

Given the “Beltway Deficit Feedback Loop,” this isn’t terribly surprising. It is, however, ridiculous.

The New York Times‘s David Leonhardt notes today that nearly all of the recent economic news has been discouraging. Jobless claims are moving in the wrong direction; growth forecasts keep getting revised in the wrong direction; oil prices are holding back growth; the housing market is still struggling badly; state and local governments are laying people off; and Europe is burdened with widespread debt problems.

Leonhardt wonders, “Are any policy makers paying attention?”

When the economy weakened in the first quarter, Ben S. Bernanke, the Federal Reserve chairman, and Obama administration officials said the slowdown was just a blip and growth would soon pick up. Today, many Wall Street economists are saying much the same thing: any day now, things will improve.

Maybe they will. But the history of financial crises shows that they produce weak, uneven recoveries, with unemployment remaining high for years. That history also shows that aggressive government action — the kind of action Washington took in 2008 and 2009, but not for most of 2010 — can make the situation much better than it otherwise would be. […]

The most sensible response for Washington would be to begin thinking more seriously about taking out an insurance policy on the recovery.

If “sensible” was the appropriate adjective to describe policymakers attitudes, there wouldn’t be so much cause for alarm.

Alas, the Fed is worried about non-existent inflation; Congress is wedded to austerity measures and Bush-era failures; and the media is convinced the debt is “the biggest problem facing the nation.”

There’s a jobs crisis, which isn’t getting better. The unemployed are feeling forgotten, because they have been forgotten. “Sensible” responses aren’t even on the table.