Blame the recession? No.

The Great Recession may have crushed America’s economic potential

Blame the tepid response, and Republican foot-dragging.

The paper offers a depressing portrait of where the economy stands nearly six years after the onset of recession, and amounts to a damning indictment of U.S. policymakers. Their upshot: The United States's long-term economic potential has been diminished by the fact that policymakers have not done more to put people back to work quickly. Our national economic potential is now a whopping 7 percent below where it was heading at the pre-2007 trajectory, the authors find.

Or maybe blame idiotic economic theory  ideology: (interjections in brackets are mine)

There is a tendency  [among supply-siders, e.g ideologues] to think of a nation’s “aggregate supply,” or potential output, as something that exists outside the realm of influence by short-term economic policy. The economic potential, after all, comes from the education of its people, the richness of its land, the quality of its machines — all things that a central banker can’t do much of anything to influence.

In other words, supply is “exogenous” to a policymaker’s economic model. But that may turn on its head in circumstances like the present. They write:

The implications for monetary policy may differ sharply from what is commonly presumed because much of the supply-side damage could be an endogenous response to weak aggregate demand. [Ya THINK!!????] If so, then an activist monetary policy may be able to limit the amount of supply-side damage that occurs initially, and potentially may also help to reverse at a later stage such damage as does occur. By themselves, such considerations militate toward a more aggressive stance of policy and help to buttress the case for a highly aggressive policy response to a financial crisis and associated recession.

In other words, when there is weak demand and people remain out of work, the cyclical downturn can become a structural downturn. That means that policymakers should move particularly aggressively to keep that from happening.

As I have been saying, 1937 all over again.Inadequate response, followed by chickening out over TEH DEFIZITTZZZ!