unemployment

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Paul Krugman has been berating against austerity hawks for years now to little effect. His latest rant, a good one as usual, is here. He gives excellent arguments, always has, for why austerity doesn’t work in a time of high unemployment and low growth. Maybe there are many of these austerity hawks who know this but as long as they themselves benefit, why change their cash cow?

Oh, and is there anyone out there who can give counter arguments as to why austerity might work? I doubt I’ll get an answer because during the last week this blog received only 15 unique visits. The chance that one of those might be willing, or especially, even interested in taking on Paul Krugman, is pretty slim indeed.

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Paul Krugman hits the nail on the head again with his Op-Ed this morning, This Is Not a Recovery. He points out we need 2.5% GDP growth just to keep unemployment from rising, and instead, the latest figure out this morning for the second quarter is 1.6%! Instead of treading water with a 2.5% growth we’re being swept backwards, as though in a Pakistan flood, with a mere 1.6% growth.

Here’s the most popular comment, twice as many votes as the next most popular, on Krugman’s article:

As enlightening as your commentary always is, it assumes that policy makers have the interest of the average American, and in particular the unemployed, at heart.

The name of your blog is quite revealing here: you indeed appear to have a conscience, and as a liberal (and further as one freely admitting to the same) you possess a small healthy dose of naivete about your fellow man, generally believing in good intentions. I’m afraid the same can not be said about the majority of those at the Fed or otherwise controlling the reigns of the broader economy.

As an economist, you really should know better than anyone: whenever an inexplicable behavior arises, the best way to find an explanation is always to simply “follow the money”. So who stands to benefit from high unemployment?

If you look at the last ten years of US economic history, you see repeated rises and falls that all follow a similar pattern: when the economy is growing, the average worker fails to benefit. When the economy falls, the worker always loses the most, in terms of both buying power and job security. The benefit to large business owners, who control the majority of wealth and political power in the US, is substantial. The shakier the labor market, the more workers worry about their job security and the less compensation they are willing to work for. Eventually most workers are simply happy to have a job at all and are forced to settle for less and less.

What other explanation, for example, in the government’s complicity in allowing US jobs to be shipped increasingly overseas?

The political and the wealthy in the US are well enough intertwined to form a well-oiled machine. The working class is increasingly powerless. The federal officials you seem to hope for see things in terms of what is most beneficial for them, and increasingly this is to work in alignment with the very wealthy, who contribute most to their election and who stand to offer most in the private sector when they cycle back out of government.

As long as labor is weak and nervous, with the promise of better times always around the corner, unrest is kept at bay enough to permit the rich to keep getting richer with little or no downside.

As nice as it would be to believe in a government with the interests of the little guy at heart, it’s about as much based on hard evidence as Santa Clause. Let’s grow up and either decide to stop complaining about it or talk about some way to fight back.
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Yes, this is a pretty cynical comment, but unfortunately it may in very large part be true. The question is, How do we fight back?

Thanks to “Klark, New York, NY” for the comment in red.

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Many argue that it was really World War II that got us out of the great depression of the 1930’s. Our vast increase in military spending is what reduced the 16.9% unemployment of 1936 to the 4.7% unemployment of 1942, they say.

So, Obama’s plan may not be up to snuff, may not be the fiscal equivalent of war. Paul Krugman is saying it’s only about one-third of what is needed. John Judis suggests an additional $70 billion in high-speed rail plus a new international monetary system.

Are these guys right? Or are our problems to be solved by tax breaks for the rich, Republican style? Me? I’ll take the former.

UPDATE: Obama in his press conference today said that if Paul Krugman is right, they’ll use his ideas, or at least evaluate them seriously. “No pride of authorship.”, said Obama.

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