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Thursday, June 09, 2011

The Unemployment Crisis Continues...

New claims for unemployment insurance remain elevated:

In the week ending June 4, the advance figure for seasonally adjusted initial claims was 427,000, an increase of 1,000 from the previous week's revised figure of 426,000. The 4-week moving average was 424,000, a decrease of 2,750 from the previous week's revised average of 426,750.


There is finally talk of doing something, but Robert Reich isn't happy that the president's discussions are focused on supply-side initiatives (I've argued that the administration's focus on supply-side policies has hurt the ability of policymakers to help employment recover):

Why the President Must Come Up With Demand-Side Solutions, And Not Go Over to the Supply Side, by Robert Reich: “I am concerned about the fact that the recovery that we’re on is not producing jobs as fast as I want it to happen,” President Obama said Tuesday, amid the flood of bad economic news...
Does this mean we’re about to see a bold package of ideas from the White House for spurring growth of jobs and wages? Sadly, it doesn’t seem so.
Obama says he’s interested in exploring with Republicans extending some of the measures that were part of that tax-cut package “to make sure that we get this recovery up and running in a robust way.”
Accordingly, the White House is mulling a temporary cut in the payroll taxes businesses pay on wages. White House advisors figure this may appeal to Republican lawmakers who have been discussing the same idea. ...
Other ideas under consideration at the White House include a corporate tax cut, accompanied by the closing of some corporate tax loopholes.
Can we get real for a moment? ... The problem isn’t on the supply side. It’s on the demand side. Businesses are reluctant to spend more and create more jobs because there aren’t enough consumers out there able and willing to buy what businesses have to sell. ...
All this translates into a continuing crisis on the demand side. ... How to get jobs back, then? By reigniting demand. Put more money in consumers’ pockets and help them renegotiate their mortgage loans.
For example: Enlarge the payroll tax break for workers — not just for employers. ... Create a WPA for the long-term unemployed. Allow distressed homeowners to declare bankruptcy on their primary residence, thereby giving them more clout with lenders to reorganize their mortgage loans. Lend federal money to (rather than bail out) states and cities that are now firing platoons of teachers, fire fighters, and other workers because state and local coffers are empty.
But we’re not hearing any of these sorts of demand-side solutions from the White House. In seeking Republican votes, Obama is putting forth Republican supply-side ideas – lowering the employer costs of hiring, cutting corporate taxes – that have nothing to do with this demand-side crisis. ...
Supply-side economics doesn’t work ... when our continuing economic crisis is so palpably being driven by inadequate demand...

At this point I'll take what I can get, and practically it's probably true that Republicans won't support anything that is inconsistent with their supply-side beliefs. However, that doesn't mean the president has to accept these constraints when he proposes policies. He doesn't have to limit himself to business tax cuts in one form or the other. He should put forth the policies he thinks are best for stimulating employment, including direct job creation initiatives. Then, he should use his bully pulpit to make it absolutely clear that Republican allegiance to the business sector couched as supply-side policies is standing in the way of doing what's best for the unemployed. He may very well end up with the policies described above in order to get something done, but it should be with great reluctance if he thinks another path would be better, and it should extract a political price from the other side.

Of course, Obama and his advisors mayd believe supply-side polices are optimal at this point, in which case I just want to throw up my hands and give up. And he may believe that negotiation over the policies would simply delay getting needed help to the unemployed without changing the policy in the end. On the last point, the fact that the administration waited until there was little time to negotiate when so many people were urging them to tackle the unemployment crisis months, if not years ago is their own fault (and the time crunch seems to be more about getting re-elected than helping struggling families anyway). Perhaps if the administration hadn't wasted so much time figuring out how to cut make the emplyment problem worse by cutting the deficit and had targeted unemployment instead, they would have had the time to negotiate properly.

As I said, I'll take what I can get at this point, and at least they're finally talking about the problem. It's just too bad the administration seems so willing to go along with policies that enable Republicans to achieve their ideological goals regarding taxes, the size of government, and the nature of government policy.

Update: See also Will a Payroll Tax Cut Stimulate the Economy?

    Posted by on Thursday, June 9, 2011 at 10:08 AM in Economics, Fiscal Policy, Taxes, Unemployment | Permalink  Comments (57)


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