EconomicCrisis.US

The free-market Mont Pelerin Society held a special session at its meeting in Stockholm earlier this month to reassess Milton Friedman’s famous lecture, “Why the American Economy Is Depression-Proof.” Friedman gave this optimistic lecture in Sweden in 1954, at a time when some prominent economists and financial advisers were predicting another crash on Wall Street and a collapse in the economy.

Now, 55 years later, in the face of the worst financial crisis since the Great Depression, everyone at the meeting wanted to know if Mr. Friedman, one of the founders of the international society, would change his mind.
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Rep. Ron Paul’s proposal to fully audit the Federal Reserve system by the end of 2010 appears likely to find its way into legislation in some form. Mr. Paul and House Financial Services Committee Chairman Barney Frank plan to meet with other lawmakers in the coming weeks to determine how the Government Accountability Office would conduct the audit and what information would be released.

What does the GAO audit now?
The GAO’s oversight of the Fed system is limited to areas outside of monetary policy. That includes everything from bank supervision to consumer issues to payment systems. The Fed’s annual report covering the calendar year 2008 listed seven completed GAO reports and eight projects underway. Fed Vice Chairman Donald Kohn testified this summer that the GAO, as of June 29, had 19 projects underway involving the Fed, including 14 launched at the request of Congress.
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The U.S. economy does not need a second fiscal stimulus package, instead the government should cut spending over the next two years, according to a survey of business economists released on Monday.

Most economists in the National Association for Business Economics (NABE) semi-annual poll were concerned about the outlook for the U.S. government budget. Also, they doubted health-care reforms proposed by the Obama administration would lower costs while increasing access and maintaining quality.

“This is one of the fastest-moving and most controversial economic policy environments we have experienced in a generation,” said NABE president Chris Varvares. “The more vexing policy challenges about which there is less agreement are federal health-care … budget policies.”
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Household income in the United States is essentially stagnant, raising doubts about whether consumers already hurt by job losses can sustain an economic recovery.

The now-ended Cash for Clunkers program helped lift consumer spending last month and is expected to deliver a bigger boost in August. But any economic rebound likely would falter if shoppers lack the income to spend more in the long run.

Especially in the U.S., consumer spending is essential: It drives about 70 percent of economic activity — more than for most European nations and well above the rates in developing countries such as China.
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