We're heading into double-digit unemployment and the condition will linger. Like it or not, only further government debt can pull us out of this decline. Robert Reich makes the case here.
Reich offers a distillation of Keynesianism: During times of economic torpor, only federal spending can bring back jobs. Private enterprise can't do it alone, because businesses have neither the credit nor the customers. Federal job creation means running up massive debts, which must be repaid when times are better.
Reaganism made Keynes unfashionable (even unthinkable), even though his policy of "military Keynesianism" illustrated the principle. Bushes 1 and 2 ruined the nation by practicing reverse Keynesianism: They ran up massive debt during flush times.
Krugman offers much the same message as he argues for a new stimulus. Didn't we already pass a stimulus bill? Yes, and it failed because little of it went to job creation. The Democratic party must rediscover its mantra: jobs, jobs, jobs.
Conservatives will now argue -- loudly -- that the very idea of a stimulus is wrong-headed (example). And the citizenry will, I fear, accept the conservative argument. Only in America would a father facing homelessness say no to a government jobs program because he does not want to put his children further into debt.
4 comments:
Don't worry Joseph, the H1N1 flu pandemic will kill millions, so we'll either be dead and our worries will be over or we'll survive and there will be lots of job openings.
It's all part of God's plan.
This time it might be too late. I don't see the Saudi's or Chinese throwing good money after bad.
As you said, if Bush wouldn't have run up the tab we could borrow, but ...
While I agree the government spending is a necessary condition for economic recovery, I don't see how it is a sufficient condition.
Unless the government returns to FDR-style major public works projects, and becomes an employer of last resort, the return of jobs will be a long time coming.
Government income supports (unemployment insurance, and extensions to how long they last) provide a floor to how low things can go, but that floor is at a subbasement level. Because such supports offer a bare fraction of the income they help replace.
XI
I'm torn about this issue. I've dilly dallied with libertarianism this year but it always ends up leaving me cold. Maybe it is a mental illness.
My concern about more spending comes not from America and Americans but from China. How much longer will they buy our empty bonds? My sense is that we are watching the U.S.'s lapse as a superpower with Obama playing the role of Gorbachev.
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