I’m basically on the same page as Steven Pearlstein regarding the recovery, but I’m not sure about this:
The positive economic news also means that the economy is in the process of shifting workers and capital to new and more productive sectors and companies. At this point in the recovery, the focus of public policy ought to be on supporting and accelerating that process, not on trying to delay and thwart it with more stimulus.
Let’s consider a clear example of a structural shift happening in the economy, the ongoing End of Retail as people shift toward online shopping. This means a smaller share of America’s built environment dedicated to stores, and a smaller share of America’s workforce dedicated to retailing. It means more people driving trucks, and more people waiting tables. Now one stimulus policy is Ben Bernanke decides to play Monetary Tooth Fairy and prints up $300 million and places $1 under the pillow of every American. An alternative stimulus policy is Ben Bernanke prints up $30 billion and places $100 under the pillow of every American. Does the structural shift happen slower if we’re visited by the stingy Bernanke rather than the generous one? I don’t see it. Some kinds of stimulus measures really are aimed specifically at propping up existing patterns of arrangements (that’s what “saving the U.S. auto industry” means) but that’s not a general feature of stimulus.
Similarly, on productivity firms have much more incentive to invest in productivity increases when labor markets are tight. If you think the unemployment rate is going to plummet over the next 12 months, then investing in labor saving methods and technology is a high priority. If you think mass unemployment will persist then it’s not that big a deal.