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What is it about the American underdog that makes him think what's best is what suite America's top dog? It's jobs, not the deficit, that matter most to everyday Americans. Jobs also matter to the economy, but the top dogs, the chattering classes, and other conventional thinkers who consider themselves serious say it's time to consider deficit reduction. All those folks who supported the trillion dollar fiscal black hole known as the Iraq War never worried about the deficit.
We can't run a deficit forever, but we can't have our workforce continually shrink either. The jobs we lose these days tend to stay lost. And all of those workers pay taxes too, which feeds the programs we depend on for our quality of life. European style employment policies, according to He Who Must Be Read, aren't all good, an free market policies aren't all bad. But we need to do something about jobs.
Long-term unemployment inflicts long-term damage. Workers who have been out of a job for too long often find it hard to get back into the labor market even when conditions improve. And there are hidden costs, too — not least for children, who suffer physically and emotionally when their parents spend months or years unemployed.
So it’s time to try something different.
Just to be clear, I believe that a large enough conventional stimulus would do the trick. But since that doesn’t seem to be in the cards, we need to talk about cheaper alternatives that address the job problem directly. Should we introduce an employment tax credit, like the one proposed by the Economic Policy Institute? Should we introduce the German-style job-sharing subsidy proposed by the Center for Economic Policy Research? Both are worthy of consideration.
The point is that we need to start doing something more than, and different from, what we’re already doing. And the experience of other countries suggests that it’s time for a policy that explicitly and directly targets job creation.
--Mb
4 responses so far ↓
1 Coachbogey
// Nov 21, 2009 at 1:06 am
A large enough stimulus package can mean only one of two possibilities: higher taxes or more debt. If we choose more debt, as your article seems to indicate, that debt continues to grow, in the form of interest on debt, even after the money has been spent . This eventually must be paid back. When the debt is to be paid back, most economists will tell you that higher taxes and inflation must be the result. Both of these will again put our economy back in peril as people are less able to afford the goods and services which drive our economy.
The bottom line is that if we choose to run up debt in an effort to artificially create jobs, then you have a short-term gain that will lead to long-term pain. An example of this is the government bailout of GM. The government bailed out GM with the threat that if the government didn't step in then GM would be forced into bankruptcy. The government rescued GM, delayed bankruptcy, but couldn't prevent it. Now GM is in bankruptcy and has accumulated massive amounts of public stimulus funds while looking for more. GM went from making its way our of bankruptcy to making its way out of bankruptcy AND owing the government (ultimately me & you) billions of dollars. Short-term gain but long-term pain.
2 Akula
// Nov 21, 2009 at 7:26 am
Following on the above comment, the federal government has never been the preferred mechanism to drive economic change -- if the desire of said government is to impart its imprimatur on the economic model. Conversely, a federal government that would (or, by the voting populace, could be convinced to) reduce its role in trying to "influence" the free market would actually have a more than fair chance of achieving a quicker end to any recession (if said desire is to actually improve the economy via the mechanism of increasing employment and improving rates of investment and entrepreneurial growth).
But the problem with a federal government of the type Obama is embracing (hard left and intensely involved & impositional) is that the end-goal is not improvement of the immediate (or even long-term) economic situation for the citizenry and businesses that drive the American economic engine, but instead a rather bald-faced effort to grow government at the federal level in a misguided attempt to "control" markets, whilst simultaneously increasing spending in an effort to increase the rolls among the dependent in our society -- who will in turn vote more like-minded liberals into office.
Consider: Every time there has been a genuine recession since World War II (all 11 instances) there has been no correlation between increased government spending and reduced unemployment levels. In fact, the government spending almost always makes unemployment worse (Source: St. Louis Fed.).
It's a wonderful game, and to be fair it's practiced on both sides of the political aisle: Create the government intervention that sets in motion the problems in the market economy, and when, years later, the problem reaches a breaking point, swoop in with what you convince the electorate will be the only "solution" that will be effective -- MORE government intervention.
Obama wants a "sweeping overhaul of the financial regulatory system" -- a financial system that is complex beyond conception. He believes he can "share information to identify gaps in regulation" and "solve problems . . . before they become crises." It simply cannot be done. In fact, government has a track record of actually reducing market discipline in the financial system whenever it intervenes (see the execrable Community Reinvestment Act as just one example).
Obama (and perhaps Mr. Krugman as well) would do well to study more the teachings of Hayek: Any aspects of such a complex system about which we can acquire accurate datapoints are "necessarily limited and may not include the important ones." Hence, the hubris is stunning -- and amounts to what Hayek described only slightly more benevolently as a "pretense of knowledge."
3 admin
// Nov 21, 2009 at 6:39 pm
It will take me a while to sort through your writing and respond. I'm not an economist. Ironically, like everyone else, it seems, I never thought of Hayek as an economist before. I knew him as a conservative and a friend of Popper, whom I have read.
For now, here's Krugman on Hayek:
http://www.pkarchive.org/cranks/hangover.html
Keynesianly yours,
Mark
4 Akula
// Nov 22, 2009 at 3:46 am
"It will take me a while to sort through your writing and respond."
Don't sweat it. Just sharing perspectives.
"I'm not an economist."
Neither am I -- just a fairly well-read, long-time business owner with myriad interests who's seen firsthand how the government can't do many of the things it tries to do.
"Ironically, like everyone else, it seems, I never thought of Hayek as an economist before. I knew him as a conservative and a friend of Popper, whom I have read."
Not sure what you mean here. From Britannica online:
"Austrian-born British economist noted for his criticisms of the Keynesian welfare state and of totalitarian socialism. In 1974 he shared the Nobel Prize for Economics with Swedish economist Gunnar Myrdal."
Hayek was a philosopher of sorts, but he was most certainly an economist.
Your advocacy of Keynesian philosophies and his interventionist approach to economic management is at the core of why it would be fair to say that I disagree with your slant on economic issues. My belief that the economy is not a machine, a la Keynes, but an organic entity, a la Hayek (and later Friedman), illustrates the reasoning behind my post above.
I have seen too many times, in too many situations, a behemoth government elephant that can't possibly begin to truly understand the intricacies of an "economy" comprised of an ocean of constituent parts -- each of them with too many disparate needs, wants, and desires for that elephant to effectively quantify and track what may be best for them. But government keeps trying anyway, and in its efforts to do so it invariably makes the effort more difficult for the millions of small businesses which are the very backbone of the nation's economic output. Perhaps you've heard the saying: As small business goes, so goes America.
To acknowledge that the Keynesian viewpoint took hold after the Depression / World War II, which I do, is not to simultaneously concede that it is the way things should be. The free market is a wonderful thing. The larger a government grows and the more it is permitted to intervene, however, the less freedom experienced by all.
Peace.