Rather than simply linking to an article, I figured I'd write a little something of my own.
It has become clear over the last two decades that manufacturing in the US has become a thing of the past. We no longer have a competitive or comparative advantage in most manufacturing elements, and this discrepancy compared to other parts of the world has expanded as a result of increasing healthcare costs.
Seeing as how there are large swaths of the US that lack higher education and vocational training in anything other than manual labor or manufacturing, how can we expect these regions to integrate into what is loosely defined as 'the new economy'? The truth is we can't - right now these people are destined to fail - and they will continue to fall behind, further depressing what was formerly known as the middle class.
Traditional Keynesian economics dictates that government spending should increase to attempt to compensate for depressed consumer spending. The thinking is that government spending on certain items has a multiplier effect, creating aggregate impacts on GDP that are greater than the amount originally spent by the government. But yet, how has our stimulus money been spent since the recession began? Tax rebates, armed conflict, purchases of toxic assets, etc. I don't believe those have significant multipliers, nor do I believe that they prepare us especially well for the future.
In all reality, we should be subsidizing continuing education for the unemployed. The long-term impact of this type of spending would have an incredibly meaningful impact on the viability of our economy. Furthermore, the government should find a way to free up credit for entrepreneurs and subsidize R&D, as innovation is what drives the US economy forward (whereas the retroactive financing of destructive financial innovation does nothing more than avoid hard-earned pain).
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