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Why must we have double-digit unemployment for the foreseeable future?

James Galbraith points fingers:

Technically it would have been fairly easy, 10 months ago, to get this bus back on the road. There could have been open-ended fiscal assistance to stop the budget hemorrhage of the states and cities. There could have been a jobs program and effective foreclosure relief. There could have been a payroll tax holiday. There could have been a strategy for sustained massive effort on infrastructure, energy and climate. There could have been prompt corrective action to resolve, instead of coddle, the worst of the banks.

I mostly don't blame President Obama; he and his team went as far as they felt they could. I blame the head-in-the-sand politicians in Congress, the over-optimistic forecasters, the half-educated press, and the power of the financial lobby. I blame the avatars of fiscal virtue, the public debt scare-mongerers, the astrologers for whom thirteen significant digits (a trillion) for the stimulus package was just too much. I blame the Senate, which hands the balance of power to small states at the expense of disaster areas like California, Florida and New York. I do blame the Bush-Obama financial policy team, who either believed that "credit would flow again" if you stuffed the banks with money, or knew that it wouldn't.


By Ezra Klein  |  November 23, 2009; 6:10 PM ET
 
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Comments

Unemployment is going to improve sooner than people think. The housing report was pretty remarkable. Here in California we're starting to add jobs. Anecdotally, people I know are starting to get hired--mainly in sales, so it could be partly a holiday thing. But the stimulus saved a lot of education and Caltrans jobs which was helpful. I don't think there's political will to hire back other state workers even if state finances improve. Those are among the jobs that may be gone for good.

Posted by: bmull | November 23, 2009 6:58 PM | Report abuse

Just because there was a decision point where government chose one of many economic alternatives, and with hindsight, the choice failed to accomplish its intended results and improve the economy (e.g., lower unemployment) does not mean that alternatives would have had a better outcome.

The basic failure of Keynesian and other interventionist economics is that it does not allow for the case where all government action may not improve results.

Interventionists (Keynesian, etc) assume that there is some government plan that will improve the economy and that if the previous plan did not then there is a need to develop another plan or more of the same plan.

It is not fatalistic to recognize that the government is not omnipotent and that there are limits to what it can achieve and that sometimes government intervention cannot improve the economy and sometimes maybe make bad economic times worse or last longer.

It is more realistic to recognize that, just as not all medical ailments have remedies and cures, not all economic maladies have government treatments that will improve the economy. Sometimes intervention does more harm than good.

Posted by: MiltonRecht | November 23, 2009 8:17 PM | Report abuse

Galbraith is spot on...

and so what now?


give up on all the good and necessary things described and not doneā€”or work to make it so.

better late than never and somethings worth doing are worth doing in a less than perfect fashion...

the problems of 10 months ago are still with us and dramatic actions will be required to push back on them...

if Galbraith is able to right these same words in November 2010 the political reality will be much different and those words will have very few sympathetic ears attached to people in power for them to fall on

Posted by: hughmaine | November 24, 2009 12:02 AM | Report abuse

As far as the foreclosure relief that Galbraith's asking for -- paying everyone's mortgage -- that was John McCain's idea last year, so why didn't Galbraith and Ezra endorse it then?

Saying "jobs program" as if there are jobs waiting to be conjured out of the air is just meaningless verbiage. Galbraith's might as well be saying we could have wished the crisis away.

And dumping money down the endless black hole of state budgets is simply transferring money from private workers to public employees. It's not an economic remedy; it's political rent-seeking. Building more bridges to nowhere falls into the same category, and, based on what we've learned this week, climate investment looks to be moving there as well.

Posted by: tomtildrum | November 24, 2009 11:37 AM | Report abuse

I'm with hughmaine, who is also spot on. What happened to that tease about another stimulus a few weeks back (I've been out of touch)?

What we've seen is the stimulus work, such pitiable amount of it that actually went into the productive economy. It's not complicated. But perhaps the Democrats are tired of holding office.

Posted by: rosshunter | November 24, 2009 1:11 PM | Report abuse

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