Republicans think that the solution to unemployment is more unemployment:
The Mellon Doctrine, by Paul Krugman, Commentary, NY Times: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into depression. To be fair, there’s some question about whether Mellon actually said that... But one thing is clear: Mellon-style liquidationism is now the official doctrine of the G.O.P.
Two weeks ago, Republican staff at the Congressional Joint Economic Committee released a report, “Spend Less, Owe Less, Grow the Economy,” that argued that slashing government spending and employment in the face of a deeply depressed economy would actually create jobs. ...
Here’s the report’s explanation...: “A smaller government work force increases the available supply of educated, skilled workers for private firms, thus lowering labor costs.” Dropping the euphemisms, what this says is that by increasing unemployment, particularly of “educated, skilled workers” — in case you’re wondering, that mainly means schoolteachers — we can drive down wages, which would encourage hiring.
There is ... an immediate logical problem here: Republicans are saying that job destruction leads to lower wages, which leads to job creation. But won’t this job creation lead to higher wages, which leads to job destruction, which leads to ...? I need some aspirin.
Beyond that, why would lower wages promote higher employment? ... In fact, across-the-board wage cuts would almost certainly reduce, not increase, employment. Why? Because while earnings would fall, debts would not, so a general fall in wages would worsen the debt problems that are, at this point, the principal obstacle to recovery.
In short, Mellonism is as wrong now as it was fourscore years ago. ...
Did I mention that in Britain, where the government ... bought completely into the doctrine of expansionary austerity, the economy has stalled and business confidence has fallen to a two-year low? ... But never mind the lessons of history, or events unfolding across the Atlantic: Republicans are now fully committed to the doctrine that we must destroy employment in order to save it.
And Democrats are offering little pushback. The White House, in particular, has effectively surrendered in the war of ideas; it no longer even tries to make the case against sharp spending cuts in the face of high unemployment.
So that’s the state of policy debate in the world’s greatest nation: one party has embraced 80-year-old economic fallacies, while the other has lost the will to fight. And American families will pay the price.
Let me add one thing to this. The employment argument Republicans are making is simply cover, lousy cover it turns out, for the ideological goal of smaller government.