For Washington, Unemployment in America is Like Famine in Africa: Someone Else’s Problem.
For people like me who find Washington’s acceptance of high unemployment puzzling, Jonathan Chait has a nice column explaining why. Chait is a senior writer for the New York magazine.
..The recovery looks safe for those of us who are not already screwed. That, sadly, has come to be the primary focus of our economic policy…
It’s important to respond to arguments on intellectual terms and not merely to analyze their motives. Yet it is impossible to understand these positions without putting them in socioeconomic context. Here are a few salient facts: The political scientist Larry Bartels has found (and measured) that members of Congress respond much more strongly to the preferences of their affluent constituents than their poor ones. And for affluent people, there is essentially no recession. Unemployment for workers with a bachelors degree is 4 percent — boom times. Unemployment is also unusually low in the Washington, D.C., area, owing to our economy’s reliance on federal spending, which has not had to impose the punishing austerity of so many state and local governments.
I live in a Washington neighborhood almost entirely filled with college-educated professionals, and it occurred to me not long ago that, when my children grow up, they’ll have no personal memory of having lived through the greatest economic crisis in eighty years. It is more akin to a famine in Africa. For millions and millions of Americans, the economic crisis is the worst event of their lives. They have lost jobs, homes, health insurance, opportunities for their children, seen their skills deteriorate, and lost their sense of self-worth. But from the perspective of those in a position to alleviate their suffering, the crisis is merely a sad and distant tragedy.
Beezer here. The fact is that at 8.3% unemployment, 91.7% of people are working. Even if you add the underemployed at 14%, that still means 86% of people are employed. Add to that the fact Chait points out–that in areas where the decision makers live like Washington DC, unemployment is as low as 4%. This allows the decision makers to decide high unemployment is not our top problem. For the Federal Reserve, which in their defense has used some unusual monetary tools to fight the recession–it’s inflation that worries them more than unhealthy unemployment numbers. Of course there’s no inflation and hasn’t been for four years, but you never know. It could become a problem, you know. And forget Congress. Most of the stimulus comes in the form of tax cuts, the only policy response Republicans will allow. Republicans blocked all the administration’s effort to hire directly for infrastructure projects, or to transfer funds directly to state’s which stops them from firing public employees. These policies would drop the unemployment rate several percentage points. Failing to transfer funds to cash strapped states added a full 1% to the unemployment rate and clipped almost 1% from the country’s Gross Domestic Product. Republicans in Congress who blocked these common sense, fiscal reponses that guarantee jobs, now attack the administration for not creating more jobs. They obviously represent their wealthy patrons, who have experienced no recession at all. The cynicism involved is breath taking.
Tags: Congressional indifference to unemployment, Income Inequality, Jonathan Chait, New York Magazine, Oligopoly, unemployment, Wealthy patrons of Congress
August 5th, 2012 at 8:28 am
There you go again, hire more govt employees. When will you realize govt employees produce NOTHING but are nothing but an expense. Look at the cities accross America that are facing bankruptcy due to the excessive costs such as over the top pensions and full healthcare paid to govt employees. Govt employees are paid at a higher rate for the same job than those in the private sector. Many have no fear of reprisal when they screw up because of union protection. The fewer the better.
August 5th, 2012 at 3:08 pm
My spending is your income. From a purely economic perspective it doesn’t matter who spends and who gains income. If IBM decides to hire a million people and invest $20 billion dollars, does that mean there’s less for Alcoa, or Apple?
Right now the private economy cannot profitably hire because of the huge loss in income, and demand resulting, caused by high unemployment.
There is tremendous productive slack and government investment isn’t going to ‘crowd out’ anyone else’s ability to invest if they so wish.
August 5th, 2012 at 3:21 pm
You obviously forget that IBM isn’t supported by the taxpayers and you’re right your proposed spending is my income.By the way, when have you ever seen govt be productive or efficeint or on budget.There is no restrictions on govt because no one oversees it.
August 5th, 2012 at 6:25 pm
Didn’t forget IBM is private, for heaven’s sake. Government provides a lot of its services efficiently. Medicare, for example, delivers health care at lower cost than private insurance companies do. SS, a defined benefit program, has administrative services far lower than private retirement funds.
Anyway, public services should not be measured by traditional P&L bookeeping used in private corporations. Much, if not most, of what government does is supportive and foundational, rather than aimed at profit and loss.
August 5th, 2012 at 9:58 pm
Maybe it should be aimed at that, SS and medicare is suppose to be covered by a TRUST but unfortunately that was changed by the dems in the 60′s when it was opened up to the general fund so dems could even spend more of our money.Roosevelt promiced it would never be taxed but in the 90′s the dem taxed it…..just to spend more and now they are both facing bankruptcy.
August 6th, 2012 at 3:27 pm
Teachers fireman, police are all public workers. When you create 100,000 private sector jobs and lay off 80, 000 public jobs the economy, especially one based on supply-side economics is not going to go anywhere. Every republican president in a recession created government jobs but this president has done the opposite and it is still not good enough!? Lowest level of government workers since the 70′s. Perhaps the problem is that we have people governing our country that do not believe in government.
August 7th, 2012 at 10:16 am
Since the NYT and Washington Post seems to be your bibles, you must be aware of the report by Ernst and Young stating that if taxes on the top 2% are raised there will be an immediate loss of over 700,000 jobs.This added to the jobs lost due to Obamacare will really put us up S…Creek. One thing I believe you will consider to be positive though…..Obama has gutted the law requiring welfare recips to obtain employment(put in by Clinton in the late 90′s) ……so it will at least take them off the unemployment rolls
August 7th, 2012 at 12:05 pm
I echo captaal. More government employees is not the answer. And sending money from the federal government (which has run > $1 trillion dollars in annual deficits for four years) to state governments is not how our system is supposed to work.
States are sovereign and can raise taxes if they desire and so can municipalities. But the real estate bubble caused many of these local governments to overhire and overspend. They are long overdue for cutting payrolls and getting pensions and benefits back to some reality like Wisconsin has done.
August 7th, 2012 at 12:43 pm
Ernst & Young was hired by the Chamber of Commerce. The report makes some unreal assumptions, which have been ridiculed by many non partisan sources. Even if the assumptions were true, which they are not, the predicted job loss is long term, not short term.
Anyway, the more neutral Congressional Budget Office has issued a report that if all the Bush tax cuts were to expire, in the long run GDP would grow more than if they remain.
http://cbo.gov/sites/default/files/cbofiles/attachments/01-31-2012_Outlook.pdf
August 7th, 2012 at 12:53 pm
For some reason you always criticize any source of info other than that from your left winged sources. Even the NYT puts credence in Ernst’s report but I guess you know better.