J. Byron McCormick Society for Law and Public Affairs Lecture

This is in many ways a very difficult time to talk about broken or dysfunctional government because we face as serious a set of short-term and long- term challenges as I think we have seen in our lifetimes.

In the short run, we continue to teeter at the edge of an economic abyss and are looking for ways to get out of our economic ditch. We clearly need something that observers increasingly say requires a jump-start, whether it is by the Federal Reserve (“Fed”) or even more, as the Fed has indicated their weapons are limited, through the rest of government and fiscal policy, to get us out of what is clearly not a typical recession. Economists have indicated very clearly— especially Carmen Reinhart and Ken Rogoff, in their magisterial book, This Time Is Different: Eight Centuries of Financial Folly1—that when you are in this kind of a downturn caused by a financial crisis, you are not going to explode out of it in a year or two, as inventories are depleted and everybody is ready to start again. You have this enormous period of time when individuals, businesses, financial institutions, and even governments have to deleverage—the worst possible thing to do when you are trying to jump-start an economy. The lost decade in Japan is the best example of how difficult that can be.