The US has squeaked through its debt ceiling crisis and survived its Standard and Poor's downgrade. While failure to increase the debt ceiling would have been 'calamitous', both these events were distractions from the pressing economic problems facing the US.

The immediate issue is that the economic recovery has stalled. In the first half of 2011 the annualised growth rate was less than 1%, leaving GDP lower than in 2008. Unemployment is 9.1%, the 28th consecutive month over 9%.

The standard response would be to ease both monetary and fiscal policy. But monetary policy is already in full stimulus mode, with the policy interest rate at zero. Fiscal policy is already running a budget deficit close to 10% of GDP. And the only policy change under discussion is from the Congressional 'super committee', deciding how to cut expenditure.

While the political debate is between single-minded groups, each adamant that it knows exactly what to do, the economic debate is more diverse, uncertain, tentative, even confused. The self-confident economic voices are from those who, for a variety of reasons, are happy enough to do nothing. Some economists argue that fiscal stimulus doesn't work (they point to the 2009 stimulus, which certainly achieved less than its proponents hoped). They still believe in the self-equilibrating forces of the economy, despite the overwhelming evidence that these are weak. Some even believe in the Confidence Fairy.

Others opine that this is not an ordinary recession, but is a debt-overhang problem and history shows it takes 7-10 years for balance sheets to be restructured. They seem reconciled to following the example of Japan's 'lost decade'. Others admonish 'first do no harm', always a facile prescription for inaction. All that's missing in this collection of procrastinators is for someone to pick up the Andrew Mellon line on the need for austerity to 'purge the rottenness out of the system'.

Economists ought to be able to offer a more positive agenda. I'll suggest some ways forward in a post this afternoon. 

Photo by Flickr user jbatteh.