American politicians are failing to help a very sick economy, said Tuesday on CNBC Edmund Phelps, Nobel Prize winner for economics in 2006.
Phelps, professor of political economy at Columbia University in New York, believes that the debate on the budget impasse is distracting in “fascinating” ways from more serious problems such as the loss of competitiveness and innovation.
“The larger picture is that the American economy has been pretty sick for some time — since the 1970s — and the symptoms of that are low employment and participation, as well as slow growth and probably low job satisfaction. Nobody is addressing what the government could do and should do to fix that problem,” said Phelps.
He added that the government supports established companies by exceptions and regulations that increased for newcomers the barriers to entry in the industry.
“New industries cannot get a foothold in the industries that already have these giant companies. Even with regards to start ups aimed at establishing new industries, they are so burdened by a thicket of regulations that as somebody said, if he were a start-up entrepreneur now, he would need more lawyers than engineers… The government is doing a tremendous amount of damage and it is failing to help a very sick economy,” he said.
Government causes a lot of harm and fails to help a very sick economy, continued economist. Phelps ‘s comments came a day after Robert Shiller, one of the winners of the Nobel Prize for Economics this year, warned that the global house prices could again reach speculative levels.
Activities of federal institutions have been partially blocked for 15 days without a budget agreement in Congress on fiscal year 2014 and if a deal is not reached soon, an economic crisis might start unfolding in a couple of days. An agreement to this effect between the Senate leaders could take place as early as Tuesday.
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