Robert J. Samuelson

… and why it menaces recovery.

America's budget problem boils down to a simple question: how much will we let programs for the elderly displace other government functions—national defense, education, transportation and many others—and raise taxes to levels that would, almost certainly, reduce economic growth?

It's hard to remember that in the 1980s Japan had the world's most admired economy. It would, people widely believed, achieve the highest living standards and pioneer the niftiest technologies.

The idea of "rebalancing" the world economy is simple. Before the financial crisis, some advanced countries (led by the United States) were overspending, and some poorer countries (led by China) were oversaving.

Somehow, it has become fashionable to think that high-speed trains connecting major cities will help "save the planet." They won't. They're a perfect example of wasteful spending masquerading as a respectable social cause.

To its practitioners, politics is about power: getting it, keeping it and using it. But for the nation, the basic purpose of politics is to conciliate.

Its power has given way to doubt.

We have entered the Age of Austerity. It's already arrived in Europe and is destined for the United States. Governments throughout Europe are cutting social spending and raising taxes—or contemplating doing so.

Behind the jobs numbers: is high unemployment just a cycle, or is there a more serious mismatch between job openings and the unemployed? Both explanations may be true.

Without startups, we're sunk.

No one familiar with the Smoot-Hawley tariff of 1930 should relish the prospect of a trade war with China—but that seems to be where we're headed and probably should be where we're headed.

With every election, we descend into soundbite economics. Rhetorical claims grow more partisan and self-serving. We are now deep in this process. President Obama's policies either averted another Great Depression—or have crippled the recovery.

It's been two years since Lehman Brothers failed (Sept. 15, 2008), and we still can't conclusively answer this question: what if the government had saved Lehman?

What state education proposals really show is that few subjects inspire more intellectual dishonesty and political puffery than "school reform."

The logic of the economic recovery isn't working—or, at any rate, not well. By that logic, over-borrowed Americans would repay loans and replenish depleted savings, creating a temporary drop in consumer spending and economic activity.

The question of what to do about Fannie Mae and Freddie Mac—the two government-created enterprises that have backed massive loans to the housing market—involves much more than finance or real estate. It marks the end of an era. The relentless promotion of homeownership as the embodiment of the American dream has outlived its usefulness.

We don't know much about bumper sticker demographics. What we do know is that the bumper sticker has now merged into the larger attack culture of slogans and sound bites.

Among the government's most interesting reports is one that estimates what parents spend on their children. Not surprisingly, the costs are steep. For a middle-class, husband-and-wife family (average pretax income in 2009: $76,250), spending per child is about $12,000 a year. Assuming modest annual inflation (2.8 percent), the report estimates that the family's spending on a child born in 2009 would total $286,050 by age 17.

You probably have never heard of oilman George Mitchell, but more than anyone else, he has changed the global energy outlook. In 1981, Mitchell's small petroleum company faced dwindling natural gas reserves. He proposed a radical idea: drill deeper in the company's Texas fields to reach gas-bearing shale rock more than a mile down.

Judging from corporate profits, we should be enjoying a powerful economic recovery. During the recession, profits dropped by about a third, apparently the worst decline since World War II. But every day brings reports of gains. In the second quarter, IBM's profits rose 9.1 percent from a year earlier. Government statistics through the first quarter (the latest) show that profits have recovered 87 percent of what they lost in the recession.

If you want a preview of President Obama's health-care "reform," take a look at Massachusetts. In 2006, it enacted a "reform" that became a model for Obama. What's happened since isn't encouraging. The state did the easy part: expanding state-subsidized insurance coverage. It evaded the hard part: controlling costs and ensuring that spending improves people's health.

It has been the most egalitarian of all the 11 recessions since World War II. In various ways, it has touched every social class. Will optimism return?

It is a myth to think that the new financial-"reform" legislation, assuming it passes the Senate, will insulate us for all time against financial panic and crisis. Great crises of the sort that occurred in 2008 and 2009 are usually separated by many decades, and so it will be hard to determine how much real protection the law provides. But the underlying ingredients of financial panics are always the same—uncertainty, ignorance, and fear—and no law can permanently abolish these.

We may be reaching the limits of economics. As Keynes noted, political leaders are hostage to the ideas of economists—living and dead—and economists increasingly disagree about what to do.

Just once, it would be nice if a president would level with Americans on energy. Barack Obama isn't that president. His speech the other night was about political damage control: his own. It was full of misinformation and mythology. Obama held out a gleaming vision of an America that would convert to the "clean" energy of, presumably, wind, solar, and biomass. It isn't going to happen for many, many decades, if ever.

It's psychology, stupid. Not since World War II has an economic recovery been so hobbled by poor confidence. Every recession leaves a legacy of anxiety and uncertainty. But the present residue is exceptional, because the recession was savage and--more important--its origins (hous­ing bubble, financial crisis) were unfamiliar.

Cost-cutting by BP, careless rig operators, and lax regulators have all been fingered as plausible culprits in the blowout. President Obama has appointed a commission to investigate the causes. There will be extensive analyses. But the stark contrast between the disaster's magnitude and the previous safety record points to another perverse possibility.

The existing poverty line could be improved by adding some income sources and subtracting some expenses. But the ad­min­istration's proposal for a "supplemental poverty measure" in 2011—to complement, not replace, the existing poverty line—goes beyond that.

The European Union's decision to rescue Greece and to create a massive financial safety net for its other vulnerable debtors is a momentous event—though success is hardly guaranteed. Contrary to popular belief, the main purpose was not to save Greece but to prevent another financial panic, à la Lehman Brothers in late 2008, that might plunge the world economy back into recession. Sagging stock prices and a falling euro are warning signs.

Why we must balance the budget.