Here is Krugman on the Obama--"private sector is fine" flub...
Also its important to keep in mind that Romney is already responding to Obama's clarifications, saying the that our economic woes have nothing to do with the failure of the public sector to keep up with growth. Anyone who looks at the data can tell it's had a huge impact.
I can't believe he actually said it but Romney thinks the message of Wisconsin was that we don't need more firemen, more policemen, or more teachers. What that has to do with the recall, or why people opposed recall of Walker is beyond me.
Which means conservatives I know are jumping all over Obama's statement, yet ignoring the fact that Romney is saying we should be INCREASING unemployment levels as a solution. Got to love that kind of chrystal clear logic on why they are against Obama (since under Obama we've seen a record decline in Government jobs which is supposed to be a top priority of most "end big Government" Republicans I know)
Yet all the political drama is covering over the crux of the problem which Dean Baker did a good job breaking down a week ago:
The discussions of the economy have lost sight of the basic score. The U.S. economy is operating at close to 6 percent below its potential with employment down by almost 10 million compared with its trend level. This is an incredible waste of resources. It is also devastating to the unemployed workers and their families.
The basic story of this downturn remains incredibly simple. We lost close to $1.4 trillion in annual demand when the housing bubble collapsed. The construction boom that was fueled by the bubble went into reverse with new construction falling to its lowest levels in more than 50 years. The consumption boom fueled by bubble-generated equity collapsed when that equity disappeared.
We cannot return to full employment until we have something to replace the demand that had been generated by the housing bubble. This is simple arithmetic.
Unfortunately, both parties in the United States refuse to talk about filling the hole created by the collapse of the housing bubble in a serious way. The Republicans talk about giving everything to “job creators,” with the idea that if we are generous enough to the rich they will show their gratitude by creating jobs.
There is zero evidence to support this view. Are we supposed to believe that investment will somehow increase by 50 percent as a share of GDP just because we are nice to rich people? The world doesn’t work that way. Firms create jobs when they have more demand, not because we are nice to their rich owners.
President Obama and the Democratic leadership have refused to put forward a serious alternative path. While they have been willing to argue that rich people should have to pay some taxes, they have not come to grips with the nature of this downturn, as if hoping that somehow the economy will just jump back to its pre-recession level of output through some magical process.
There is no black magic that will allow the economy to over-ride arithmetic. In the short-term only the government can provide the boost necessary to support the economy. Over the longer term we will need to get the trade deficit down through a more competitive dollar.