What it might take for the US to remain No. 1
Economists call for greater thrift, less dependence on foreign oil, and a closer watch on Wall Street.
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Mr. Morici is wary of Obama appointments to positions dealing with the economy such as that of Timothy Geithner, selected as Secretary of the Treasury, and Lawrence Summers, designated as director of the National Economic Council.Skip to next paragraph
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They "don't get it," he says, because of their past connections with the Bush and Clinton administrations, adding that they were "born and bred on Wall Street."
Morici wants change in the "incentive structure" in the financial system so managers aren't tempted to take reckless positions, such as excessive financial leverage, in order to get rich quick.
"We can expect to lose our financial leadership," he predicts. Financial business will be dispersed to locations with excess funds, such as the Middle East and Asia. "We have let bankers line their own pockets and destroy their own country in the process."
Further, Morici calls for stronger action to reduce the massive US trade deficit and the borrowing required to finance that red ink, particularly by tackling its huge deficit with China. As it is, "We are selling our country to foreigners" as they use their surplus dollars to buy US companies and other assets, he says. Americans will end up "paying rent" to foreign landlords in Saudi Arabia, China, and elsewhere.
Morici suggests a tax on Chinese exports, structured so that it would decline if China let its currency rise in value to a more realistic level. A highly valued yuan would make China's exports more expensive, slowing the flood of Chinese goods to the US.
Though welcoming Obama's intentions to reduce the dependence of the US on imports of oil, Morici cautions, "Don't trade oil dependence for battery dependence." Asian nations, he says, are already striving to grow their capacity to build batteries as the US shifts its auto fleet to hybrids and electric cars in the years ahead.
Not every economist has such a negative outlook for the American economy. Irwin Stelzer, a scholar at the Hudson Institute in Washington, points out that because the US has such an economic lead in terms of per capita gross domestic product (the national output of goods and services), he doesn't expect any major nation to catch up within 50 years.
Even if one did, he says, "It's nice when other people are rich."
Mr. Stelzer also suspects Wall Street has "a kind of energy" that will enable it to retain its top standing in global finance. A believer in the Sarbanes-Oxley regulatory act of 2002 that requires greater transparency in American corporations, he figures the US will be faster now than other financial centers in getting its regulatory system "in order."
US capitalism won't die, he maintains. "It will emerge stronger."