I just read a very interesting blog post by David Friedman on the current economy and the differing approaches of the US and the UK (http://daviddfriedman.blogspot.com/2010/11/most-expensive-research-project-ever.html). I haven't decided how much I agree or disagree with, but I thought it would be interesting to post my remarks here:
An interesting observation. However, something I think we seem to be overlooking here (and which was not an issue during the Roosevelt Administration), is the vast increase in outsourcing. How does that affect (or not) the GDP? Also, the outsourcing and automation of many jobs that formerly supported a significant portion of the working population has changed not just the employment rate, but the nature of consumption. Why pay an American a decent wage when you can buy cheap crap from China? Something that I have noticed in the past decade is that we all want jobs that will support an upper middle income (or higher) lifestyle, but we don't want to pay the costs of goods and services that support the jobs that support that lifestyle. It becomes a downward spiral- the more we demand low prices, the more goods are imported and jobs are sent overseas. No jobs or lower-wage jobs increase the demand for lower prices of goods... I think it's the economic version of the saying "Everyone wants to get to heaven, but nobody wants to die".
Of course, I don't have any brilliant ideas for stopping that spiral, or reversing it. And it appears that no one in the Treasury Department or the Federal Reserve has any bright ideas either.