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Short-Term Solutions to Crisis Won't Cut It: Sachs

Economist argues for systemic adjustment

By Nick McMaster, Newser Staff

Posted Nov 10, 2008 2:15 PM CST

(Newser) – The financial crisis can't be averted, and the Obama administration would be wise to accept that and concentrate on "a steady policy that will steer us through an unavoidable short-run recession to arrive at a much healthier economy within three to five years," writes Jeffrey Sachs for the Guardian. Proposals of tax cuts, spending increases, homeowner bailouts, and 0% interest rates are “panic, not policy,” warns the celebrated economist.

“The US needs not just a stimulus in spending, but structural change,” writes Sachs. Obama should try to raise US exports to offset declines in consumer spending, and stimulate domestic investment rather than trying to continue reckless foreign borrowing. The roots of a sensible solution to the current crisis lie in "a much sounder economic and social structure, including reforms to healthcare, energy policy, education and other infrastructural ailments."

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President-elect Obama points down the table during a meeting with his economic advisory team in Chicago, Friday, Nov. 7, 2008. (AP Photo/Pablo Martinez Monsivais)

President-elect Obama answers questions during a news conference in Chicago, Friday, Nov. 7, 2008. (AP Photo/Pablo Martinez Monsivais)

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The US budget deficit is vast and rapidly expanding. We can't simply gut the tax system further. Any short-term stimulus should be consistent with a long-term expansion of the tax base as a share of GNP, not a reduction.
- Jeffrey Sachs

Many Democrats want to "get tough" with China on trade. That position is absurd. China is a large creditor of the US, a vital purchaser of its goods and an indispensable global partner in any real solution to climate change.
- Jeffrey Sachs

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Short-Term Solutions to Crisis Won't Cut It: Sachs