In congressional testimony last month, Ben Bernanke noted “unusual uncertainty” in the economic outlook and in a speech last week the Fed chairman warned of a “considerable way to go” before the US achieves a full recovery.
Although Fed policymakers still believe the basic trajectory of the economy remains one of moderate expansion, there may be more attention given to heightened dangers of a sharp slowdown. “The FOMC will have to tone down its assessment of the economy in view of recent weak indicators on real growth, real consumption spending and employment,” said Brian Bethune and Nigel Gault, economists at Global Insight.
The latest poor reading came in Friday’s monthly employment report, which showed the US private sector creating only 71,000 jobs in July – not enough to keep up with population growth, let alone bring down the unemployment rate. That followed news a week earlier that growth in US gross domestic product slowed from an annualised rate of 3.7 per cent in the first quarter to 2.4 per cent in the second quarter.
“Given how low inflation already is, and given the potential for the recovery to falter, we expect Fed officials will highlight downside risks and signal a bias to ease in the FOMC statement,” said Jim O’Sullivan, chief economist at MF Global.
There is little, if any, doubt that the FOMC will maintain interest rates at their current low target range of 0-0.25 per cent
Monday, August 9, 2010
Fed set to downgrade outlook for US
Thursday, August 5, 2010
Quote of the day...
"Since 1979 Republicans have regularly been offering deficit-exploding plans while claiming that they are deficit-reducing plans. Paul Ryan is simply the latest in a 31-year tradition of fiscal policy three-card-monte...
Fool me once, shame on you; fool me for thirty-one consecutive years...
Congress Set to Boost Aid to States - WSJ.com
Congress took a decisive step Wednesday toward finalizing a $26 billion bill offering aid to states, a surprise win for Dmocrats keen to demonstrate they're taking action on an economy showing signs of weakness.But Wednesday's action, which won the support of two Republicans, suggests members of Congress are sufficiently concerned about the mixed signals from the economy that they're willing to approve narrow spending bills, particularly those with political resonance ahead of this year's midterm elections.
Wednesday's 61-38 vote in the Senate overcame a filibuster and made final passage in the Senate likely as soon as Thursday. House Speaker Nancy Pelosi (D., Calif.) responded by taking the rare move of calling House members back from their summer recess next week to pass the bill and send it to the desk of President Barack Obama...
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Most Republicans opposed the bill. Only Maine's two Republican senators, Olympia Snowe and Susan Collins, joined Democrats in favor.
To win the Maine senators' support, Democrats dropped plans to cut $107 million in funds expected to go largely to Bath Iron Works, a General Dynamics Corp. facility that builds Navy ships in Maine. The Iron Works is one of the biggest private employers in the state with 5,000 workers.
Ms. Snowe said she voted for the bill only because she agreed the potential teacher layoffs constituted an emergency. She also demanded the House return to Washington from its recess to pass the bill.
House members, who often mock the Senate for its slow pace, may feel frustration at being asked to drop their campaigning and return to Washington because of the Senate's action. The Senate is expected to leave the capital at week's end. House leaders, however, concluded the measure was urgent and politically appealing. Congress isn't scheduled to return for a regular session until mid-September, after the school year begins for most students.
The last time the House returned from a recess was 2008, when lawmakers sought to pass an aid package for the auto industry. Before that, the House came back to Washington in 2005 to deal with the case of Terri Schiavo, a brain-damaged woman whose husband was seeking to remove her feeding tube.
Wednesday's bill includes $10 billion to help states avoid layoffs of teachers, police officers and fire fighters and another $16 billion to help states make their Medicaid payments.
Ethan Harris, head of North American economics at Bank of America/Merrill Lynch in New York, said the bill "is worth maybe a tenth of a percentage point in growth over six months." But it is vital for states, he said, which have "cut all the easy stuff, so they're cutting into much more popular programs."
Adds Mark Zandi, chief economist at Moody's Analytics: "If they didn't get this, the job cutting and tax increases states would have to make over the next six months would put a significant weight on the fragile recovery."
Republicans warned that states were becoming too dependent on federal aid. "For the first time in our history, the federal government is the single largest source of revenue for the states," Senate Minority Leader Mitch McConnell (R., Ky.) said on the Senate floor. "When does it end?
Republicans also complained about the bill's revenue source. The legislation is paid for, in part by imposing new limits on foreign tax credits used by U.S. multinationals to lower the taxes they pay in this country. Republicans said this would drive companies, and jobs, overseas.
For several months now, Georgians for a Healthy Future has been monitoring efforts in the U.S. Senate to extend the enhanced matching rate for Medicaid funds (known as FMAP). Today, by a vote of 61 to 38, the U.S. Senate cleared a crucial procedural hurdle by voting to end debate (known as cloture) on legislation to extend the enhanced FMAP funding for an additional six months, through June 30, 2011. The Senate has scheduled a final vote on this legislation for tomorrow evening.
Though Senators Chambliss and Isakson did not vote in favor of cloture, 61 Senators voted to allow a vote to proceed to provide this critical fiscal relief to states. Also today, the Speaker of the U.S. House of Representatives called House Members back from August Recess to take up the legislation next week.
Georgia had been relying on Congress to pass a six-month continuation of the enhanced matching funds for Medicaid when the Legislature and Governor Perdue approved the FY 2011 budget, which runs from July 1, 2010 through June 30, 2011. Despite having built this assumption into our state's budget, the enhanced funds had been set to expire on December 31, 2010. The six-month extension contained in this legislation will extend the enhanced funding to states until the end of Georgia's fiscal year, bringing in an estimated $375 million in federal dollars to our state.
Without the enhanced FMAP, Georgia may have to make cuts to essential health care services for our most vulnerable families or cut reimbursement rates to providers, potentially limiting access to care and further harming our state's fragile economy. In these difficult economic times, more Georgians are in need of safety net programs such as Medicaid and PeachCare. This funding extension will ensure, at least temporarily, that the state can continue to meet these most basic needs. While there is still much work ahead, today's vote is a small victory worth celebrating.
Unemployment: The Economists Just Don't Get It
Lately, there has been a fair amount of buzz in the economics blogosphere about the issue that I've been discussing here: Structural Unemployment.
Paul Krugman touches on it here. Brad DeLong says this. Mark Thoma has a post in a forum focusing on structural unemployment at The Economist.
If you read through these posts, however, you won't see a lot of discussion about the case I've been making, which is that advancing technology is the primary culprit. I've been arguing that as machines and software become more capable, they are beginning to match the capabilities of the average worker. In other words, as technology advances, a larger and larger fraction of the population will essentially become unemployable. While I think advancing information technology is the primary force driving this, globalization is certainly also playing a major role. (But keep in mind that aspects of globalization such as service offshoring--moving a job electronically to a low wage country--are also technology driven).
The economists sometimes mention technology, but in general they find other "structural" issues to focus on. One that I have seen again and again is this idea that people can't move to find work because their houses are underwater (the mortgage exceeds the equity). The emphasis given to this issue strikes me as almost silly. Are there any major population centers in the U.S. that have really low unemployment?
Even if people could sell their homes, would they really be motivated to load up the U-haul and move from a city with say 12% unemployment to one where it is only 9%? Have the economists lost sight of the fact that 9% unemployment is still basically a disaster? The few locales I've seen with unemployment significantly lower than that are rural or small cities (Bismark ND, for example)--places that are simply incapable of absorbing huge numbers of hopeful workers. Let's get real: playing musical chairs in a generally miserable environment is not going to solve the unemployment problem.
Another thing the economists focus on is the idea of a skill mismatch. Structural unemployment, they say, occurs because workers don't have the particular skills demanded by employers. While there's little doubt that there's some of this going on, again, I think this issue is given way too much emphasis. The idea that if we could simply re-train everyone, the problem would be solved is simply not credible. If you doubt that, ask any of the thousands of workers who have completed training programs, but still can't find work.
Economists ought to realize that if a skill mismatch was really the fundamental issue, then employers would be far more willing to invest in training workers. In reality, this rarely happens even among the most highly regarded employers. Suppose Google, for example, is looking for an engineer with very specific skills. What are the chances that Google would hire and then re-train one of the many unemployed 40+ year-old engineers with a background in a slightly different technical area? Well, basically zero.
If employers were really suffering because of a skill mismatch, they could easily help fix the problem. They don't because they have other, far more profitable options: they can hire offshore low wage workers, or they can invest in automation. Re-training millions of workers in the U.S. is likely to make a killing for the new for-profit schools that are quickly multiplying, but it won't solve the unemployment problem.
Why are economists so reluctant to seriously consider the implications of advancing technology? I think a lot of it has to do with pure denial. If the problem is a skill mismatch, then there's an easy conventional solution. If the problem's a lack of labor mobility, then that will eventually work itself out. But what if the problem is relentlessly advancing technology? What if we are getting close to a "tipping point" where autonomous technology can do the typical jobs that are required by the economy as well as an average worker? Well, that is basically UNTHINKABLE. It's unthinkable because there are NO conventional solutions.
The crisis of middle-class America
The slow economic strangulation of the Freemans and millions of other middle-class Americans started long before the Great Recession, which merely exacerbated the “personal recession” that ordinary Americans had been suffering for years. Dubbed “median wage stagnation” by economists, the annual incomes of the bottom 90 per cent of US families have been essentially flat since 1973 – having risen by only 10 per cent in real terms over the past 37 years. That means most Americans have been treading water for more than a generation. Over the same period the incomes of the top 1 per cent have tripled. In 1973, chief executives were on average paid 26 times the median income. Now the multiple is above 300.
The trend has only been getting stronger. Most economists see the Great Stagnation as a structural problem – meaning it is immune to the business cycle. In the last expansion, which started in January 2002 and ended in December 2007, the median US household income dropped by $2,000 – the first ever instance where most Americans were worse off at the end of a cycle than at the start. Worse is that the long era of stagnating incomes has been accompanied by something profoundly un-American: declining income mobility.
Alexis de Tocqueville, the great French chronicler of early America, was once misquoted as having said: “America is the best country in the world to be poor.” That is no longer the case. Nowadays in America, you have a smaller chance of swapping your lower income bracket for a higher one than in almost any other developed economy – even Britain on some measures. To invert the classic Horatio Alger stories, in today’s America if you are born in rags, you are likelier to stay in rags than in almost any corner of old Europe.
Combine those two deep-seated trends with a third – steeply rising inequality – and you get the slow-burning crisis of American capitalism. It is one thing to suffer grinding income stagnation. It is another to realise that you have a diminishing likelihood of escaping it – particularly when the fortunate few living across the proverbial tracks seem more pampered each time you catch a glimpse. “Who killed the American Dream?” say the banners at leftwing protest marches. “Take America back,” shout the rightwing Tea Party demonstrators.
Statistics only capture one slice of the problem. But it is the renowned Harvard economist, Larry Katz, who offers the most compelling analogy. “Think of the American economy as a large apartment block,” says the softly spoken professor. “A century ago – even 30 years ago – it was the object of envy. But in the last generation its character has changed. The penthouses at the top keep getting larger and larger. The apartments in the middle are feeling more and more squeezed and the basement has flooded. To round it off, the elevator is no longer working. That broken elevator is what gets people down the most.”
Unsurprisingly, a growing majority of Americans have been telling pollsters that they expect their children to be worse off than they are. During the three postwar decades, which many now look back on as the golden era of the American middle class, the rising tide really did lift most boats – as John F. Kennedy put it. Incomes grew in real terms by almost 2 per cent a year – almost doubling each generation.
And although the golden years were driven by the rise of mass higher education, you did not need to have graduated from high school to make ends meet. Like her husband, Connie Freeman was raised in a “working-class” home in the Iron Range of northern Minnesota near the Canadian border. Her father, who left school aged 14 following the Great Depression of the 1930s, worked in the iron mines all his life. Towards the end of his working life he was earning $15 an hour – more than $40 in today’s prices.
Thirty years later, Connie, who is far better qualified than her father, having graduated from high school and done one year of further education, makes $17 an hour. The pace of life has also changed: “We used to sit around the dinner table every evening when I was growing up,” says Connie, who speaks with prolonged vowels of the Midwest. “Nowadays that’s sooooo rare.”
Connie’s minimally educated father earned enough to allow her mother to remain a full-time housewife and still fund two children through college. Connie and Mark, meanwhile, struggle to pay off the stream of bills in a dual-income household. The state of Minnesota pays for Andy, their 20-year-old son, who suffers from acute autism, to study theatre at the local community college.
Strictly speaking, Connie actually lives in a four-income household. “When Andy was two, I was told to buy a karaoke machine because autistic children sometimes respond well to it,” says Mark, pointing at what can only be described as a postmodern antique. “That’s how I got into my karaoke business. I get about $100 every Wednesday evening. And on Saturdays I manage the local liquor store. We need all four jobs to keep our heads above water.”
So much for the rising tide.
From the point of view of most economists, the story so far is uncontroversial. Most agree on the diagnosis. But they diverge on the causes. Many on the left blame the Great Stagnation on globalisation. The rise of China, India, Brazil and others has undercut wages in the west and put America’s unskilled, semi-skilled and even skilled workers out of jobs. Manufacturing now accounts for only 12 per cent of US jobs. Think of the typical Detroit car worker 30 years ago, who had a secure middle-class lifestyle, good healthcare and a fat pension to look forward to. Today, he lives in Shenzhen.
Another group singles out the explosion of new technology, which has enabled the most routine and easily automated jobs to be replaced by computers. Think of the office assistant, who once took dictation and brewed the coffee. She is now a BlackBerry who spends half her life in Starbucks. Or the back office person who, much like those shoemakers in the fairy tale, now stitches your accounts in Bangalore while you sleep.
Then there are those, such as Paul Krugman, The New York Times columnist and Nobel prize winner, who blame it on politics, notably the conservative backlash which began when Ronald Reagan came to power in 1980, and which sped up the decline of unions and reversed the most progressive features of the US tax system.
Fewer than a tenth of American private sector workers now belong to a union. People in Europe and Canada are subjected to the same forces of globalisation and technology. But they belong to unions in larger numbers and their healthcare is publicly funded. More than half of household bankruptcies in the US are caused by a serious illness or accident.
. . .
What, then, is the future of the American Dream? Michael Spence, a Nobel Prize-winning economist, whom the World Bank commissioned to lead a four-year study into the future of global growth, admits to a sense of foreboding. Like a growing number of economists, Spence says he sees the Great Stagnation as a profound crisis of identity for America.
For years, the problem was cushioned and partially hidden by the availability of cheap debt. Middle-class Americans were actively encouraged to withdraw equity from their homes, or leach from their retirement funds, in the confidence that property prices and stock markets would permanently defy gravity (a view, among others, promoted by half the world’s Nobel economics prize winners, Spence not included). That cushion is now gone. Easy money has turned into heavy debt. Baby boomers have postponed retirements. College graduates are moving back in with their parents.
The barometer is economic. But the anger is human and increasingly political. “I have this gnawing feeling about the future of America,” says Spence. “When people lose the sense of optimism, things tend to get more volatile. The future I most fear for America is Latin American: a grossly unequal society that is prone to wild swings from populism to orthodoxy, which makes sensible government increasingly hard to imagine. Look at the Tea Party. People think it came from nowhere. While I don’t agree with their remedies, most Tea Party members are middle-class Americans who have been suffering silently for years.”
Spence admits he is thinking aloud and going “way beyond the data”. And he concedes that America probably still retains its most vibrant strength in its still world-beating capacity for technological innovation. Most economists are not as bleak as Spence. But it is in the neighbourhoods among ordinary Americans that his pessimism gets its loudest echo. “To be pessimistic about the future is so new for Americans and so strikingly un-American,” says Spence. “But most people grasp their own situations way better than any economist.”
. . .
Every now and then the Freemans invite their neighbours round to their front porch, to watch the world go by, drink beer and eat Connie’s justly renowned dish of Minnesota wild rice. In the best American spirit, Mark and Connie are active neighbourhood people. They are the types who shovel your snow, volunteer for school events, and coach the baseball little league – Mark has done all three.
It takes optimism to be like this. But in the past few years the Freemans have been running low on it. “I guess the penny dropped in the last 18 months when we finally realised that it’s always going to be like this – we are never going to be able to retire on our savings,” says Connie. “As for Andy,” she says, referring to her painfully shy but acutely observant son, “the future really frightens me. If you’re young, it’s bad enough nowadays. But for a kid with autism?”
When I asked what the American Dream means to them, Mark looked despondent. “It’s not a dream,” he said. “I would hate to sound like one of those Tea Party people but I really do want my country back. I just don’t feel like that is going to happen.” His words reminded me of a famous quip by George Carlin, the late, great American comedian – “It’s called the American Dream because you have to be asleep to believe it.”
September Senate Debate Expected on Extending Tax Cuts for Rich
Both Mr. Geithner and the president hammered on the theme that administration policies point the way forward while Republicans would take the country back to the days of the Bush administration, and not just on tax policy.
Mr. Obama told the labor leaders they must remind their members, “this election is a choice,” between “these folks who drove America’s economy into a ditch” and the Democrats who for 20 months have “been shoving that car out of the ditch inch by inch” as Republicans stood by.
“And now we’ve finally got that car up on the blacktop there, about to drive, and they say they want the keys back. Well, you can’t have the keys because you don’t know how to drive,” Mr. Obama said, to laughter.
He added, “Somebody pointed out to me that when you’re in a car and you want to go forward, you put it in ‘D.’ You want to go back in the ditch? You put it on ‘R.’ ”
All of the 2001 and 2003 income tax cuts are scheduled to expire after this year, an expiration written into law at the time they were passed to hold down estimates of the measures’ impact on future annual budget deficits.
Mr. Obama pledged in his election campaign that he would maintain the tax cuts past 2010 for the roughly 98 percent of American households in which families make less than $250,000 a year or individual filers make less than $200,000.
Republicans, who have opposed the administration’s other stimulus spending and tax cuts, have seized on the recovery’s slowdown to argue that the Bush tax cuts should continue for wealthy Americans, emphasizing that the group includes some small-business owners who file their tax returns as individuals.
The administration and most Congressional Democrats counter that just 2 percent of small businesses have enough income to be affected should the top tax rates revert to their pre-Bush levels. More generally, they argue that extending the tax cuts for the rich would add to the nation’s dangerously rising debt; so do the tax cuts for everyone else, but Democrats point to nonpartisan studies showing that tax cuts for lower-income households are a far more effective way of spurring the economy because they spend the extra money while most wealthy taxpayers generally save it.
Yet a few Congressional Democrats in Republican-leaning districts and states are reluctant to have the tax fight right before November’s elections. That has led to talk that all the tax cuts will be extended for a year or two.
Mr. Geithner said even a temporary extension would be a mistake. In international forums, he has cited the tax cuts’ expiration as a major way in which the United States will begin reducing its projected debt.
“The world,” he said, “is likely to view any temporary extension of the income tax cuts for the top 2 percent as a prelude to a long-term or permanent extension, and that would hurt economic recovery as well by undermining confidence that we’re prepared to make a commitment today to bring down our future deficits.”
As stimulus, Mr. Geithner added, the $30 billion needed for a one-year extension would be better spent for more middle-class tax cuts, business investment incentives or aid to hard-pressed states.
And he dismissed as “myths” Republican arguments that tax cuts pay for themselves, by bringing in new revenues from economic growth, and that small businesses would be hurt. “This is a political argument masquerading as substance,” he said.
Geithner warns over Bush-era tax cuts
Tim Geithner, US treasury secretary, on Wednesday suggested there was little room for compromise on the Obama administration’s plans to let tax cuts for wealthy Americans enacted under George W. Bush expire at the end of the year, saying even a delay until 2011 would hurt the economic recovery.
“The world is likely to view any temporary extension of the income tax cuts for the top two percent as a prelude to a long-term or permanent extension,” Mr Geithner said. “That would hurt economic recovery by undermining confidence that we are prepared to make a commitment today to bring down our future deficits.”
The US government plans to renew the Bush tax cuts for Americans earning less than $250,000 per year, but has faced criticism from Republicans and some centrist Democrats over its push for increases in higher-income tax rates to take effect immediately.
The fight over the tax cuts is expected to be a significant point of friction between Republicans and Democrats in the run-up to the midterm congressional elections, scheduled for November. In an interview with the FT last month, Paul Ryan, a leading Republican in the House of Representatives, said the battle over the Bush tax cuts was also a “dress rehearsal” for the 2012 presidential election.
Monday, August 2, 2010
HOPE's dwindling finances worry lawmakers | ajc.com
Students and their parents better start saving more money for college.
Georgia’s popular HOPE scholarship is at the tipping point as demand outstrips its funding.
"This is not a train wreck about to happen," said Rep. Len Walker (R-Loganville), chairman of the House higher education committee. "The train wreck has happened."
Lawmakers agreed Monday that changes are needed to keep the merit program used by more than 200,000 students annually financially viable. That legislation isn't expected until this winter. Instead a joint meeting between the House and Senate higher education committees served to shock lawmakers into understanding the severity of the situation.
The Georgia Lottery, which supports the scholarship and prekindergarten programs, is one of the most successful in the country but it can’t keep up as more people attend college and tuition rises.
Projections show a shortfall of about $244 million for this fiscal year, said Tim Connell, president of Georgia Student Finance Commission, which oversees HOPE. The shortfall is estimated to be about $317 million for the 2012 fiscal year, he said.
The scholarship has reserves to cover the shortfall. But those accounts, which totaled about $1 billion earlier this year, will drop to about $371 million by the end of the 2012 fiscal year.
Some lawmakers wondered whether the money was flowing to the correct students.
Of the 24,415 students who started with HOPE in the fall of 2003, only 46 percent maintained grades high enough to keep the scholarship after their freshman year, Connell said.
Sen. Nan Orrock (D-Atlanta) questioned whether it was time to re-instate an income cap for eligibility.
When the program began, only students whose families earned less than $66,000 a year were eligible. The cap was later lifted to $100,000 and then eliminated.
"If we are spending loads and loads on families whose students were always going to go to college because their families had the income and then we are getting significant failure rates, what are we really doing?" Orrock asked. "We all hear the anecdotes about the families buying condos in Athens or buying their students cars because they are getting HOPE."
Another lawmaker suggesting funding HOPE at just 70 percent. Others said they wanted to compile suggestions from agency heads and university leaders.
HOPE provides full tuition and some book and fee money to college students who maintain a 3.0 grade-point average.
Lawmakers addressed HOPE's finances in 2004 when they tightened eligibility requirements and instituted triggers that would reduce benefits if reserves got too low.
The first reduction, cutting book awards from $300 to $150, will take place next fall, said David Lee, vice president of strategic research and analysis for the commission. The subsidy would be eliminated altogether the following year. Starting with fall 2013, students would no longer get money for mandatory fees, Lee said.
These cuts won't save much money. Slicing book awards in half saves about $20 million, Connell said.
Some lawmakers questioned if lottery sales will improve once the economy rebounds. Georgia Lottery President and CEO Margaret DeFrancisco said the goal is to increase sales but she couldn't predict "astronomical increases."
During the 2010 fiscal year, which ended June 30, the lottery paid out more than $2.1 billion in winnings while depositing about $884 million into the education accounts for HOPE and prekindergarten. That wasn't enough for the scholarship, forcing the commission to dip into reserves for the first time in nearly a decade.
"Lottery revenues will never, in my opinion, approach the HOPE expenditure again," Walker said.
Walker said the higher education committees will meet again in November to discuss solutions.
"I hope we can work in a unified, bi-partisan way to deal with this issue," he said.
Sunday, August 1, 2010
Economic View - Like New Deal, Stimulus Should Create Jobs Directly
ACROSS the United States, thousands of federally financed stimulus projects are under way, aimed at bolstering the economy and putting people to work. The results so far have not been spectacular.
Why not? There’s nothing wrong with the idea of fiscal stimulus itself. We need more stimulus, not less — but we need to focus much more on actually putting people to work.
Two friends of mine, both economists, came upon a stimulus project recently that illustrated the problem. On a Wyoming highway they saw a sign that read “Putting America to Work: Project Funded by the American Recovery and Reinvestment Act” and prominently featured a picture of a worker digging with a shovel. Out on the road, there was plenty of equipment, including a gigantic asphalt paver, dump trucks, rollers and service vehicles. But there wasn’t a single laborer with a shovel. That project employed capital, certainly, but not many human beings.
Like many such stimulus projects, it could be justified if you accept the idea that gross domestic product, not jobs, is central — a misconception rooted in economic theory, or at least in the way that Keynesian economic theory has evolved.
The conventional concept of “recession” has been defined in terms of G.D.P., not unemployment, which is perceived as a “lagging indicator.” It is widely assumed that jump-starting “the economy,” as measured by G.D.P., is the most fundamental move we should make.
Stimulate the economy, so the theory goes — get that economic engine humming — and it will provide plenty of rides for the unemployed, and good rides too, as healthy businesses expand. In addition, focusing on increasing the G.D.P. rather than on creating jobs is related to the notion that we need real jobs, jobs that are not make-work, jobs with a future. And there is something to this: We would not want to see teams of laborers with shovels at construction sites that could operate more efficiently without them.
Yet unless we take new measures, we face the prospect of protracted unemployment. In June, the unemployment rate stood at 9.5 percent and the rate of long-term unemployment, defined as joblessness for at least 27 weeks, was 4.4 percent — its highest level since 1948. Both Ben Bernanke, chairman of the Federal Reserve, and Christina Romer, chairwoman of the White House Council of Economic Advisers, recently said that high unemployment was likely to persist for years.
This would have an enormous human cost, and it is especially worrisome for people who are young or otherwise vulnerable and may be inclined to give up and drop out entirely. Ultimately, of course, this will show up in the traditional measures of G.D.P., as well.
So here’s a proposal: Why not use government policy to directly create jobs — labor-intensive service jobs in fields like education, public health and safety, urban infrastructure maintenance, youth programs, elder care, conservation, arts and letters, and scientific research?
Would this be an effective use of resources? From the standpoint of economic theory, government expenditures in such areas often provide benefits that are not being produced by the market economy. Take New York subway stations, for example. Cleaning and painting them in a period of severe austerity can easily be neglected. Yet the long-term benefit to businesses from an appealing mass transit system is enormous. (This is an example of an “externality,” which the market economy, left to its own devices, will neglect.)
Such benefits are hard to measure precisely because there is no current market price for them. Cost-benefit analysts tend to be in endless debate about such programs, and so the social impetus for them often becomes blurred. Keep this in mind, though: Whatever the merits of specific programs, the cutoff that we choose for classifying a project as “good” or “bad” should be adjusted downward in periods of widespread unemployment.
Some researchers have expressed doubts, for example, that “throwing more resources” at students — providing more teachers and aides — is cost effective, in terms of objective measures of educational outcome.
In a period of severe joblessness like this one, however, someone who is sitting unemployed who would rather be working at a modest salary as a teacher’s aide should be given a chance, at least until the economy improves. In other words, the unemployment rate itself should be a major factor in evaluating such programs.
In 1936, John Maynard Keynes made much the same point: “Thus we are so sensible, have schooled ourselves to so close a semblance of prudent financiers, taking careful thought before we add to the ‘financial’ burdens of posterity by building them houses to live in, that we have no such easy escape from the sufferings of unemployment.”
PRESIDENT FRANKLIN D. ROOSEVELT’S New Deal, though no more than partly successful, was much more focused on job creation than our current economic stimulus has been. It seems that the New Deal was also more successful at inspiring the American public.
Consider one of the most applauded of Roosevelt’s programs, the Civilian Conservation Corps, from 1933 to 1942. The program was open to young men, initially those 18 to 25, a group that was quite vulnerable economically. The C.C.C. emphasized labor-intensive projects like planting trees.
The public appreciated the tree planting because the projects addressed big problems that had been ignored. Major dust storms in and around Oklahoma raged from 1930 to 1936, denuding whole regions of agricultural land. The storms were vivid evidence of an externality that environmentalists had warned about for years, to little avail. Unregulated farming and lumbering had allowed pervasive soil erosion.
Aside from the environmental benefits, the C.C.C. encouraged a sense of camaraderie, taught young men new skills and gave its workers a sense of participation in something historic.
Congress has recently set plans for tripling the size of AmeriCorps, the modern counterpart of the C.C.C., which now takes both sexes and has no age cap. At its peak, the C.C.C. employed 500,000 young men. Under current plans, AmeriCorps would top out at 250,000 people in 2017, even though the nation now is two and a half times larger. We ought to be bolder.
Big new programs to create jobs need not be expensive. Suppose the cost of hiring a single employee were as high as $30,000 a year, several times typical AmeriCorps living allowances. Hiring a million people would cost $30 billion a year. That’s only 4 percent of the entire federal stimulus program, and 0.2 percent of the national debt.
Why don’t we just do it?
From neocons to crazy-cons - latimes.com
Once, the iconic figures on the political right were urbane visionaries and builders of institutions — like William F. Buckley Jr., Irving Kristol and Father Richard John Neuhaus, all dead now. Today, far more representative is potty-mouthed Internet entrepreneur Andrew Breitbart, whose news and opinion website, Breitbart.com, is read by millions. In his most recent triumph, Breitbart got a U.S. Department of Agriculture official pushed out of her job after he released a deceptively edited video clip of her supposedly endorsing racism against white people. What has become of conservatism? We have reached a point at which nothing could be more important than to stop and recall what brought us here, to the right, in the first place.Buckley's National Review, where I was the literary editor through the 1990s, remains as vital and interesting as ever. But more characteristic of conservative leadership are figures on TV, radio and the Internet who make their money by stirring fears and resentments. With its descent to baiting blacks, Mexicans and Muslims, its accommodation of conspiracy theories and an increasing nastiness and vulgarity, the conservative movement has undergone a shift toward demagoguery and hucksterism. Once the talk was of "neocons" versus "paleocons." Now we observe the rule of the crazy-cons.