The Slow Road to Recovery

Economist Brad Delong:

• 12/08 Baseline: What the Obama Administration forecast in late 2008 the unemployment rate would be if Bush administration fiscal policy were retained and the ARRA were not passed.
• 12/08 Baseline + ARRA: What the Obama Administration forecast in late 2008 the unemployment rate would be if its proposed policies were enacted.
• 2/10 Forecast: What the Obama Administration is currently forecasting for the unemployment rate.

Yes, I know, I know, it's been scary since the spring of 2009. But it is scary.

Then he asks when will it be morning in America again?

What if, starting in January of 2009, the unemployment rate were to have gone up and then come down as rapidly as it did starting in January 1982? That's the red line. Recent history and the administration's unemployment forecast make up the blue line:

Mark Thoma over at University of Oregon talks some about this as well and how the political spin hurts the policy---which then hurts the political outlook...

I don't much feel like talking about the president's budget proposal. It pretty much gives up on the unemployment problem even though their own forecast for years of above average unemployment shows there's more than enough time to use additional fiscal policy measures to do something about the unemployment problem. But the choice is to focus on deficit reduction rather than reducing the unemployment rate.

Additional fiscal policy measures could make a difference to the unemployed, but instead the administration is proposing policies that might sell well, but only address a tiny fraction of the long-run deficit problem.

Health care reform is the key to solving the deficit problem, but reform is being held up by the party of just say no. That's the message Democrats need to hammer into public perception, that true inroads into deficit reduction through health care reform are being blocked by Republicans. In the meantime, Democrats need to take care of business the unemployed. Yes, the party of no will try to block additional stimulus, but they fight everything, and helping struggling households is worth standing toe to toe and fighting back.

When the next election rolls around and unemployment is still too high, but falling, we'll hear all about how the administration helped to put us on the road to recovery. They will be right, but the question will be why they chose such a slow road when a faster one was available.

 

Posted via email from Jim Nichols