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Wednesday, June 02, 2010

"Does Washington Care About Unemployment"

Continuing the political economy discussion from yesterday, why is there so little urgency in Washington about the unemployment problem?:

Does Washington Care About Unemployment?, by Brad DeLong: We are live at The Week: ... The last time we had an oversupply of workers of this magnitude was 1983, during the Reagan-Volcker disinflation. ... The unemployment rate hit 10.5 percent. ... Washington, D.C. was in a panic. With high unemployment perceived as a genuine national emergency, the Federal Reserve embarked on a policy of massive monetary ease. The Reagan administration promised that the deficits created by its 1981 tax cuts and increased defense spending were the recipe for putting America back to work. Everybody had a plan to reduce unemployment. And every lobbyist or speculator with a scheme unrelated to jobs recast his pet project as a magic unemployment-reducing bullet.
Today, the unemployment rate is kissing 10 percent. ... Yet, unlike 1983, there is no sense of urgency in Washington. ...
The Federal Reserve has had its monetary throttle fully open for more than two years now. But it is no longer talking about further turbo-charging the engines of growth. Instead, deliberations within the Federal Open Market Committee appear preoccupied with how best to apply the brakes. A degree of panic would be more appropriate — along with a commitment to use that panic to drive job-creation. ...
The Obama administration and the Democratic majority in Congress passed a fiscal stimulus plan half the size recommended by Democratic economists fifteen months ago. Since then, they have been unable to assemble a political majority to finish the second half of the job. There seems to be no appetite for addressing ten percent unemployment.
Instead, we have the Obama administration calling for a three-year spending freeze on programs unrelated to national security. We have Democratic Congressional Campaign Committee chairman Chris van Hollen calling for deeper short-term spending cuts. We have an administration experiencing difficulty finding $23 billion to prevent additional teacher layoffs, even though maintaining — no, expanding — investment in education in a recession is the no-brainiest of no-brainers.
Why the enormous disconnect? ... I can’t help but think that ... a deep and wide gulf has grown between the economic hardships of Americans and the seeming incomprehension, or indifference, of courtiers in the imperial city.
Have decades of widening wealth inequality created a chattering class of reporters, pundits and lobbyists who’ve lost their connection to mainstream America? Has the collapse of the union movement removed not only labor’s political muscle but its beating heart from the consciousness of the powerful? Has this recession ... left the kind of people who converse with the powerful in Washington secure in their jobs and thus communicating calm while the unemployed are engulfed in panic? Are we passively watching an unrepresented underclass of the long-term unemployed created before our eyes?
I don’t know. But this unseemly calm does astonish me.

    Posted by on Wednesday, June 2, 2010 at 12:36 AM in Economics, Fiscal Policy, Monetary Policy, Unemployment | Permalink  Comments (77)


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