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Originally Posted by sebastian_dangerfield
It's structural in that:
1. The cost of our labor is uncompetitive in a global marketplace;
2. Our workforce can't move due in large part to housing issues;
3. There is a mismatch in skills causing a substantial portion of the unemployment rate;
4. The previous demand was credit based, and that is now gone, removing the primary structural engine of our growth from 2000 through 2007; and
5. We've a service based economy that needs to reindustrialize to a degree, which is a huge undertaking. |
1. This isn't the cause of the recession. We're talking about people who are unemployed now who weren't a few years ago.
2. It's a nice theory, but there's nowhere with pent-up demand they could move to. If the problem was that the economy blew in part of the country and was short workers in another part, and the housing mess was preventing people to move from one to the other, I would agree. But there isn't anywhere to move to right now.
3. Likewise, there's no part of the economy requiring lots of skills that are in absence. And don't start linking the Minnesota Fed guy to me, or I will get all over your ass with the many people who have responded to his nonsense. Oh, hell, you started it, so here's some Krugman:
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Claims that there has been a huge jump in structural unemployment — that is, unemployment that can’t be cured by increasing aggregate demand — are playing a large role in the argument that we should basically do nothing in the face of a terrible economy. No need for the Fed to do more; no need for more fiscal stimulus — hey, it’s all about defective labor markets, and we should work on structural reform, one of these days. And don’t expect improvement for years to come. Structural unemployment is invoked by Fed presidents who want to raise rates, not cut them, by economists who want austerity now now now, and in general by almost everyone in the pain caucus.
The question is, why on earth would you believe that structural unemployment is our main problem right now?
Basic textbook macro tells you how to distinguish between slumps brought on by supply shocks and those brought on by demand shocks: look at inflation. If you have stagflation, rising unemployment combined with accelerating inflation, that’s the signature of a supply shock; if you have unemployment with disinflation, that’s the signature of a demand shock. And guess what we see?
Now, you might second-guess this basic observation if there were strong direct evidence of some kind of labor mismatch — layoffs in some industries combined with labor shortages in others; high unemployment for some types of labor combined with tight markets and soaring wages for others; high unemployment in some regions but exceptionally good hiring in others. But as EPI documents, none of these things are, in fact, visible.
Is it possible that there has been some rise in structural unemployment that’s swamped by a much larger rise in cyclical unemployment? Yes, conceivably. And let’s talk about that when unemployment gets below, say, 7 percent — which at current rates of progress will happen, well, never.
I really don’t think there’s any way to make sense of the fuss about structural unemployment unless you posit that a lot of influential people are looking for reasons not to act. Based on everything we know, this just shouldn’t be an issue. What the economy needs is more demand; provide that, and you’ll be amazed at how many willing, productive workers there are, currently sitting idle.
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4. and 5. I don't think you can call credit a "structural engine" of our growth, and the idea that we need to re-industrialize seems provocatively cute, but both are grasping around the fundamental problem that we need to see more
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I could go on about the effects of technology on our workforce, the long term dim outlook for housing, etc... But you get the point. It's not as simple as you suggest. The answer to every point made is not to repeat like a broken record, "We need the govt to step in and shore up demand!"
I don't have a bridge to anywhere; you're right. But what you're suggesting is pissing more money out the window to make the inevitable all the much worse when it comes. I get the "soft landing" argument. But when you blow a trillion to ensure a soft landing, I say that's enough. It isn't going to get much softer, and you're miles past the point where law of diminishing returns kicks in.
By the way, that they fucked up the first stimulus isn't an argument for a second. "Oh, we misallocated those trillion borrowed dollars. We need a another round." Madness.
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Your ideological hostility to government spending is blinding you. We don't have to pay people to dig holes and fill them. We could fix roads and bridges, clean up highways and parks, hire back laid-off teachers, paint roofs white to save energy, build high-speed rail.
People who get paid to analyze such things by private business will tell you that the first stimulus worked. There is some irony in the fact that the private sector understands this, and that the people who are saying it failed are saying so for political reasons, and not because anyone would buy their analysis.
And I'm not arguing at this point about what the Senate or House is likely to do. The fact that they can't be trusted to get something like this done shows how broken they are, but that's another conversation.
