Unemployment: still terrible
September 10, 2011 12:09 AM Subscribe
posted by russilwvong (212 comments total)
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Obama to Congressional Republicans: pass this jobs bill, or take the blame
. The Economist
has the details of the plan. Paul Krugman
describes the plan as significantly bolder and better than expected. Good news and bad news: Obama's plan would work, but GOP won't pass it.
With the official unemployment rate
at 9.1%, zero jobs growth in August, and interest rates at zero, what should the US do? There's two schools of thought:
1. The problem is lack of demand
. It's a technical problem. The US needs to increase demand by any and all means: monetary policy
, fiscal policy
(infrastructure spending, tax cuts), exchange rate policy (demand for US exports increases as the dollar declines).
. Charles Evans
. And some history: Japan
. The return of demand-side economics
(1998). How the economics profession failed.
2. High unemployment is just a symptom. The real problem is the need to liquidate past unsound investments
. It's a moral problem. This is painful, but necessary. Moreover, businesses aren't hiring in the US because the US isn't competitive: the US government is profligate, the US economy is over-regulated and over-taxed, the US workforce is unproductive. The US needs to embrace austerity, reduce regulations and taxes, and encourage individuals to take responsibility for themselves (by cutting unemployment benefits, for example). Charles Evans describes this view:
Essentially, the hypothesis that limits aggressive policy actions assumes that the productive capabilities of the U.S. have declined markedly in recent years and that many workers who were productively employed just a few years ago are now essentially obsolete. In this scenario, either much of the past decade of prosperity was an illusion or, alternatively within the space of only a few years, the productive potential of the U.S. collapsed for some unexplained reason.
Also see: Just World Syndrome
, Austrian economics
Which of these two schools of thought currently has a majority in the House of Representatives?