So it was welcome news to see President Obama pivot from deficit reduction to job creation in his widely anticipated speech last week. The president proposed a combination of spending and tax reduction policies, and he surprised many people with the boldness of his proposals and his passion and commitment to the issue. Unfortunately, it’s unlikely to do much to help with the unemployment problem.
There's plenty of time to provide help, the dismal prospects for recovery detailed above make that clear. So the time it takes to implement job creation policies – the objection that there are not enough shovel ready projects – is not the issue. And while concerns over the deficit are valid for the long-run, they shouldn’t prevent us from doing more to help the jobless. The long-run debt problem is predominantly a health care cost problem, and whether or not we help the jobless doesn’t much change the magnitude of the long-run problem we face.
The problem is the political atmosphere. Republicans may go along with doing just enough to look cooperative rather than obstructionist, but no more than that and the policies that emerge are unlikely to be enough to make a substantial difference in the unemployment problem. It won’t be anywhere near the $445 billion program the president has called for, which itself is short of what is needed to really make a difference...
Thus, despite the President’s newfound interest in job creation, and the call from some at the Fed to treat the unemployment problem the same way they would treat elevated inflation – as though “their hair was on fire” – the actual policies that come out of Congress and the Fed are unlikely to be sufficient to make much of a dent in the problem.
It’s time for this to change. The loss of 8.75 million payroll jobs since the recession began should be a national emergency. But it’s not, and the question is why. Why has deficit reduction taken precedence over job creation? Why is our political system broken to the extent that a whole segment of the population is not being adequately represented in Congress?
That brings me to an important difference between the response to this recession and the policies that followed the Great Depression. Many of the policies that were enacted during and after the Great Depression not only addressed economic problems, they also directly or indirectly reduced the ability of special interests to capture the political process. Polices that imposed regulations on the financial sector, broke up monopolies, reduced inequality through highly progressive taxes, accorded new powers to unions, and so on shifted the balance of power toward the typical household.
Saturday, October 1, 2011
The Jobs Crisis
Mark Thoma ("Economist's View") asks, "Why isn't the unemployment crisis a national emergency?"