In order for the economy to grow, you have to make things that improve people's quality of life.
You have to grow things that people can eat (real food that nourishes bodies not the frankenfood that ConAgra creates).
You have to make manufactured goods that save people time or money, or that increase comfort or well being.
You have to make technological innovations that cure diseases or solve problems or connect people in meaningful ways.
You have to provide services that increase stability, that increase happiness, or that help people live fulfilling lives.
You have to build the infrastructure (physical and social) upon which all of the rest of this economic activity can transpire.
That is the foundation of economic growth in any country.
But since 1993 and the passage of NAFTA, the U.S. doesn't really make things anymore. We've shipped a large portion of our manufacturing to Mexico and China and the third world.
A number of companies -- like the private health insurance industry -- create the illusion of making something. Judging from their ads, private health insurance companies claims to be an accounting service to improve health care access, quality, and affordability. But in reality, they are just rackets to pump money from people to corporations.
Since the repeal of Glass-Steagal in 1999, the only thing that has propelled U.S. economic growth is "financial services." But it turns out that the U.S.led "innovation in financial services" was really just a scam, an elaborate mathematical Ponzi scheme executed by the best and brightest firms on Wall Street.
So when President Obama tries to stimulate a depressed economy now, the problem is, the only thing that the U.S. really makes anymore, the only thing we really excel at, is rackets, scams, and financial Ponzi schemes. Left with little choice, the Obama financial team led by Geithner & Summers has tried to re-inflate the financial services bubble and the housing bubble. Because really, that's all we got.
The problem is that this strategy is not going to work. The fundamentals just aren't there. The idea that we can run a successful economy without making things that actually improve people's lives is just silly. The idea that we can just muddle through this mess and everything will be okay is about to crash headfirst into the brick wall of reality.
So, my guess is that the re-inflated housing and financial services bubble will pop. I imagine traders will take profits in the early summer, sticking small scale investors with huge losses, and we'll head into the second dip of the great recession by fall. Because the Wall Street crowd doesn't really don't care if the bubble pops again-- they know they'll get a better deal from a Republican Congress and that a Republican electoral sweep is more likely if the economy is in tatters next November.
The alternative of course would be for Obama to acknowledge the depth of the economic and political problems facing the country and begin to address them. It would likely need to include restoring Glass-Steagal, canceling NAFTA, nationalizing the health insurance and oil industries, cutting the defense budget in half, bringing our troops home from Afghanistan and Iraq, restoring FDR-era levels of taxation on the rich, and creating a national university system dedicated to science and engineering. Ian Welsh has a great list of things that are needed "To Fix America." But again it does not seem that Obama is interested in having that sort of conversation with America or pushing that sort of legislative agenda through Congress. It is exactly the sort of sober, adult conversation that Obama potentially could be really great at. But instead we get nonsense about bipartisan budget commissions and the 'need to reform entitlement programs' including Medicare and Social Security. Quite literally, facing an economy that is hitting on no cylinders -- our political class proposes slashing the most effective anti-poverty programs in the history of the world rather than addressing the sources of the problem.