Jon Markman, writing at MSN Money explores that question. He discusses the over-all grim economic outlook and warnings of financial disaster from the attendees of the World Economic Forum recently held in Davos, Switzerland. Markman points out that these people have been wrong before, and that policymakers do have a short time frame to head off disaster. But, he goes on to state that if the policymakers fail to make the right decisions quickly, they may not be able to fix things for years:
(continued)
"...Are things really that bad? Maybe not...Credible economic analysts now say there is still a narrow window of time in which policymakers in the United States, Europe and Asia can avoid a meltdown over the next year by immediately coordinating the injection of real financial adrenaline to banks, companies, households and local governments -- not just rhetoric and indiscriminate spending. Yet that window is closing fast, and if the right steps are not taken soon it may be shut for years..."
The problem, is that the "policy makers" in the US can’t seem to get past "rhetoric", can’t agree on what constitutes "indiscriminate spending"—and certainly haven’t been able to agree on, much less "coordinate" the injecting of the correct mix of the correct stimulus to the correct recipients.
But governments don't know which steps work because economic theory breaks down at the level of human psychology...economists try to mathematically determine the choices citizens are likely to make, then use the results to recommend a policy mix to legislators...The problem is that the models often fail to accurately forecast human behavior, and politicians regularly screw it all up by ignoring the data and diverting funds to pet projects...
What does Markman say that Congress needs to do to rescue the economy?
"...To prove the Davos set wrong, in short, congressional leaders must make the right choices at warp speed under pressure from special interests..."
Unfortunately, the congressional leaders have shown little ability to work quickly, or to make sound choices, free of the influence of the Wall Street financial people that are in large part responsible for the crisis in the first place.
What might be the consequences of failure to get it right? (emphasis mine)
The Davos pessimists' case for a severe economic dislocation over the next year -- let's go out to the extreme and call it a potential depression -- is easily made, as four key ingredients are in place. Their recipe calls for a blend of cyclical recession, severe deleveraging, a shift of demographics favoring savings over consumption, and inappropriate fiscal and monetary responses by policymakers...
The first three are well under way, so the last one is the decider."
It seems that our politicians are far more focused on winning the next election than they are with saving the country from economic disaster. They are more focused on shifting blame than on objectively listening to the majority of experts, following their advice, and doing what is best for the country.
Even if you’ve already contacted your Congress members, and Senators, as well as the White House, it couldn’t hurt to keep holding their feet to the fire. What they do or don’t do in the next weeks and months will have ramifications for years to come.