Let me start this post with a caveat: I am not an economist. I don’t play one on TV. At most, I’m a reasonably well-informed consumer of economic news.
That news, however, is troubling. Following the various indicators could give you whiplash–housing may be recovering, but unemployment claims are up. No, unemployment claims are down, job creation’s up, but retail is down. No, retail is up this month, but…Well, you get the point. If the economy were a car, it would be stuck in low gear.
There are as many theories about what ails the American economy as there are pundits and candidates for office. It’s too much government spending or not enough stimulus or the meltdown in the EU or GOP efforts to win the Presidency by delaying the recovery. And all of these analyses clearly point to contributing factors.
But what if what we are seeing is the start of a long-predicted “structural change” brought about by technology? What if Europe calms down and we get past November only to discover that employment still doesn’t return to previous levels? And since I’m playing “what if” here, what if instead of the toxic political finger-pointing and infantile blaming that characterizes our current politics, we had a serious discussion about the appropriate response to that structural change?
Persistent high unemployment would present a huge challenge to social stability and economic health. Fewer people with money to spend would depress markets; more people needing social welfare support would stress the federal budget and make it more difficult to reduce the deficit. The existence of a persistent underclass would generate resentments and social unrest at a level that would dwarf today’s Occupy movement.
It seems to me–again, an admitted economic amateur–that such a scenario would require government to become an employer of last resort. Surely, hiring people to mow parks, clean streets, assist in classrooms and do similar jobs would be preferable to welfare, both for those being employed and society at large. The tasks being performed would improve the quality of life in our cities and towns, and productive employment would provide people with both self-respect and money to spend in the market.
Right now, of course, the rhetoric is all about heading in the opposite direction: laying off even badly needed government workers and pooh-poohing their value. If we are seeing the start of structural change, it’s going to be awfully hard to turn that tanker around.
5 thoughts on “What If? What Then?”
All true. One of the largest problems is that the HUGE international corporations are sitting on their piles of cash until they get rid of our President. They COULD be spending now. They choose not to because they want to defeat Pres Obama. Several of them have admitted this to Chris Mathews already. With so little help from the “Job Creators”, the public sector will have to step up. Lets let ALL the Bush tax cuts expire so our government once again has the funding it needs to properly do its job. Roads, Bridges, Rail Lines, all big stuff that needs money NOW. Teachers, Cops, Firemen: Need money NOW. Europe tried the Austerity plan. It failed. Time to do what works. We have been trickled on enough. It is time for jobs for Americans. If the “Job Creators” refuse, what choice do we have?
Varous reports indicate unemployment would be a full 1% lower were it not for dismissals of
public employees at state and local levels (police, firefighters, teachers, professors, etc.)
Increasing joblessness shrinks the economy and has put Europe in a downward spiral. I hope America sees the light before it’s too late.
Back in the mid-1970’s I read a few books by Alan Watts (can’t remember who is was or what he did other than write books); he made a profound statement that has stuck in my mind all these years. “Man is going to computerize himself out of existence.” I believe computerization was the beginning of the gradually escalating and continuing unemployment rates we see today; unemployment leads to less spending which leads to a troubled financial structure and all that it entails.
How about this for a beginning: If spending money you don’t have is illogical in your own home, why does it make any more sense in government?
If the contention is we have to “invest”, to “prime” our economy to recover, then after printing more money in part to buy our treasury notes that no one else is buying- when do we stop? Would you define it as successful strategy in your own business, for you to buy the same widgets that you manufacture because no one else is buying them?
I’m not an economist either, but my impression from reading about Keynes is even he had limits. Nobel prize or not, I’m not sure Krugman does.
Economics, like anything else, is situational. If we had a $15 trillion working surplus I would say go for it. We don’t.
In fact we are deep in the red EVERY year at the federal level. The point isn’t that the government shouldn’t be investing at the local level, the point is that the FEDERAL government shouldn’t be investing at the local level. The problem with these temporary patches is that when the fed occasionally pulls their head out of their butt and cuts back spending, it ripples through every state and municipality.
As a course of nature, local governments begin to expect and grow dependent on federal grants, instead of being encouraged to solve their own problems. There is a substantial likelihood of this getting worse, as some of the more fiscally irresponsible states will probably begin asking for their own “bailout” here in the next few years. Whether people choose to believe it or not, our fiscal ship is listing badly to port.
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