Republicans, Democrats, and Jobs
"Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. The measure of success attained by Wall Street, regarded as an institution of which the proper social purpose is to direct new investment into the most profitable channels in terms of future yield, cannot be claimed as one of the outstanding triumphs of laissez-faire capitalism…."
John Maynard KeynesJohn Buellis a columnist for The Progressive Populist and a faculty adjunct at Cochise College. His most recent book is Politics, Religion, and Culture in an Anxious Age.“It is a jobless recovery, if it's a recovery at all,” said Romney on NBC of the latest employment data. “It really doesn't look like a recovery. If this president's re-elected you're going to see chronic high unemployment continue for another four years or longer.” If it is a jobless recovery, much of the credit will surely go to Republicans, who have done everything in their power to cripple the current recovery, not out of intellectual;/ideological conviction that government is powerless in the face of a major recession but merely in order to maintain or even worsen the adverse circumstances in which Obama is running. Congressional Republicans almost to a person voted against President Obama’s American Jobs Act. Yet surprisingly, economists for both business and labor groups argued that this proposal, which included school repairs, rehiring laid off teachers and first responders, and extended emergency unemployment insurance, would have cut the unemployment rate to nearly 7%. As Mark Zandi of Moody’s Analytic put it: “If fully implemented, the Obama jobs plan would increase real GDP growth in 2012 by 2 percentage points, add 1.9 million jobs, and reduce the unemployment rate by a full percentage point, compared with current fiscal policy.”
“Unfortunately Mulligan provides no evidence to back up his version of reality. By contrast, Jesse Rothstein, an economist at Berkeley, looked at the behavior of unemployed workers. He found that at most, the supply-side effect from the extended duration of unemployment benefits in this downturn increased measured unemployment by 0.1-0.5 percentage points. Furthermore, most of this increase was due to keeping workers looking for work and therefore being counted as unemployed. (When a worker stops looking for work, they are no longer counted as being unemployed.){In addition}, since the benefits gave workers tens of billions of dollars that they would not have otherwise, they undoubtedly had a large demand side effect. The Congressional Budget Office estimates the multiplier for unemployment benefits as being 1.6, meaning that the $40 billion a year in extended benefits (roughly the amount at stake) would lead to an increase in GDP of $64 billion or more than 0.4 percent of GDP. If the increase in employment is proportionate, it would imply 560,000 additional jobs. This would swamp the negative supply side effect that Rothstein found in his research.”
A Jobless Future? Bank on it. President Obama has been smart both economically and politically in pushing his modest job agenda. Nonetheless, he is not without fault, especially in his neglect of the role investment banks have played in the current crisis. Though staunch Republican opposition explains the relative parsimony and poor targeting of the initial job creation package, the President’s premature proclamation of victory and conversion to deficit hawk cast suspicion on his subsequent efforts. Worse still, the President continues to shy away from the role that banks played in the crisis and the problems private debt pose for any future recovery.Australian economist Steve Keen believes that a modern capitalist economy is intrinsically unstable, that banks and debt creation are the most powerful fingers of instability. There are limits to our ability to predict the course of the economy and we must therefore take steps to build firewalls to limit the range of outcomes the system can generate. Keen agrees that a Keynesian stimulus is a good short- term response to depression. Keeping teachers, police, fire fighters on board surely clips the unemployment rate and their spending is likely to stimulate some other jobs. But how good is this temporary job creation in the long term and will it produce a self-sustaining recovery? And how accurately can our models tell us what will happen? Most of the models, even those used by liberal economists, assume that markets basically work and move toward equilibrium at optimal price and quantity points. Conservatives see the process of adjustment to external shocks as automatic. Liberals argue that because some market are not perfectly competitive, the system must be juiced occasionally but will then move easily to smooth growth.Keen argues that Keynes had a more profound and compelling view. Uncertainty is at the center of economic life. A new stimulus puts money in the hands of teachers and firefighters who would otherwise be fired. But money also trickles into the banking system and levels of debt remain high. What banks will do with the money and when individuals or entrepreneurs will begin to borrow again even for productive investment remains a question.
