The Notre Dame Center for Ethics and Culture hosted a panel discussion on the state of the economy and its relation to the upcoming election on October 3 in the McCartan Courtroom of the Law School. The discussion featured four prominent Notre Dame economists. The panelists focused around the question, “What are the biggest challenges facing our economy, and what is the best way to approach these challenges in light of human dignity and the common good?”
Dr. Timothy Fuerst opened by comparing the current state of the economy to its potential state. He explained that usually, when an economy hits a rough patch, it “plucks” back, meaning real and potential gross domestic product (GDP) go back to their normal levels. The recovery is still slow and tepid, as shown by the atypically low real GDP levels. As Fuerst put it, “we are out of pluck.” The current interest rate is at 0 percent and cannot go any lower, which could lead to inflation in the future. To combat this problem, he suggested that the Federal Reserve gradually raise the interest rate back to the normal 4-4.5 percent. There is the added risk, however, that this would lead to less investment spending and make it more difficult for the government to pay back their loans.
Dr. Michael Pries continued the presentation with a look at the labor market. Currently, unemployment is around 7.8 percent, which translates into six million more people unemployed right now than were before the recession. This does not include the number of people who have left the workforce or simply given up trying to find a job. The main problems in the labor market are the lack of demand and a mismatch in the skills and geographical location of the workers. Pries argued that our current path is not fixing these problems, even with the aggressive policies that President Obama has put in place. So exactly what is the driving force behind the unemployment? “I have a lot more questions than answers. That’s what makes it exciting to be an economist in these times,” Pries concluded.
This was followed by a discussion of fiscal policy by Dr. Eric Sims. He explained that the government cannot provide for prosperity out of thin air –– it needs to be able to pay for what it provides. He emphasized that the country is headed toward a fiscal cliff, with the debt owned by the public projected to grow toward 100 percent of GDP. In comparison, the Greek public debt was 150 percent of its GDP just before its economy collapsed. “We’ve got to do something. The status quo is not working,” Sims stated. He suggested eliminating loopholes in the tax code would be more successful than a progressive tax. He argued that the latter option is not helpful enough, as taxing those classified as “rich” for every penny of their income would simply lower the deficit a mere 10 percent a year.
Dr. Nelson Mark concluded the panel discussion on the international aspects of the current economy and election cycle in America. He explained that since China is one of the United States’ largest export countries, it is therefore in our best interests for China to grow in investment and exports. However, since China also trades frequently with the European Union, the recent trouble in the EU has been slowing China’s economic growth rate, which will affect the US as well. Mark laid out the two choices America is faced with that have also challenged European countries: declare bankruptcy or provide complete bailouts. “Either way, restructuring needs to take place,” he explained. “It’s going to be painful, and people are going to be upset…but it’s got to be done.”
The consensus of the night was that whoever becomes president next January will be taking on an economy that is out of pluck, facing high unemployment rates, and in need of restructuring. The American people have the opportunity this November to choose a president whom they think will promote economic growth and the dignity of the human person.
Abigail Bartels is a freshman Political Science and Something Else double-major and a boot-loving Minnesotan who enjoys long walks in the snow. If you would like to discuss politics or are looking for winter survival tips, email her at firstname.lastname@example.org.