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Punditry is counter-cyclical

Business are making a lot of money right now. But they're not hiring. That's bad for the economy, but it's been good for commentators who can say that the reason they're not hiring is because the government is doing things that the commentator doesn't like, or maybe because the government isn't doing things the commentator does like. For instance, here's Nobel-prize winning economist Gary Becker:

The real threat to a robust recovery on the labor side has come from employer and entrepreneurial fears that once the economic environment improves, a Democratic Congress and administration will pass pro-union and other pro-worker legislation that will raise the cost of doing business and cut profits. In this way the obvious pro-union-pro-worker bias of the present government has contributed to a slower recovery, especially in labor markets. This helps explain the depressingly slow decline in unemployment rates and in the number of workers who have given up looking for jobs.

You'll notice that there's no actual data backing up this assertion. No polls, no anecdotes, no studies. Nothing. And yet it's a huge claim: A Nobel-prize winning economist naming "the real threat to a robust recovery" during arguably the worst economy since the Great Depression. But he's just spitballing.

I'm pointing to Becker's post because it's particularly weird: I've been reporting on the question of business confidence all week, and I can say that unions are not something that business trade associations, business owners, economic forecasters or economists are mentioning, at least in my sample. I've heard about aggregate demand and general uncertainty, I've heard concerns about taxes and deficits and the financial reform law. I haven't heard about the Employee Free Choice Act.

But I expect to see even more of this kind of thing as time goes on. The conversation over what the economy needs is increasingly becoming a conversation over what people would like to see Washington do (or undo, or not do) in general. Paul Ryan thinks businesses would start hiring if we repealed financial regulation and health-care reform. George Voinovich thinks the answer is a highway bill. Rahm Emanuel isn't the only one who doesn't like to waste economic crises.

By Ezra Klein  |  August 5, 2010; 4:17 PM ET
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"Business are making a lot of money right now. But they're not hiring."

Lump them all together then. You have to ask where is "business" making "a lot of money"? From US markets or abroad? Where are their factories located? And on and on.

Posted by: tuber | August 5, 2010 4:29 PM | Report abuse

"Nothing. And yet it's a huge claim" -- should we call that the Krugman Syndrome, in honor of another Nobel recipient?

Posted by: rmgregory | August 5, 2010 4:44 PM | Report abuse

Someone once said that statistics are like a bikini, what they show is interesting, but what they don’t show is critical. What Ezra and his boy wonder Dylan do is start with a Democratic talking point, such as: The current economic downturn is not the fault of Obama or the Democratic congress. Next they use the Google to find other liberal bloggers and liberal studies to back up the talking point and then link to them. On some days they will even draw a pretty graph to show that their parents did not waste the money they spent on their Ivy League education.

What the Nobel Prize winning Gary Becker does is something much more difficult. He is looking at the big picture by evaluating a larger spectrum of data from sources other than the Huffington Post. He is drawing his conclusions after looking at the evidence. Ezra draws the conclusion first then looks under every liberal rock to find the shreds of evidence that will make his point marginally plausible.

Posted by: cummije5 | August 5, 2010 4:57 PM | Report abuse

Gary Becker believes that businesses are anticipating a future Congress that is more union-friendly than the current one? Becker has obviously done good work in the past, but it's amazing how very smart people can park their brains in the refrigerator when they want to say something to scratch their ideological, if not partisan, itch.

Posted by: robbins2 | August 5, 2010 5:21 PM | Report abuse

i agree with robbins2. short of cloning Nancy Pelosi (ewww!) I don't see how you get MORE pro-union in the next several congresses.

Personally I think they're waiting this storm (er, uh congress) out until the next more pro business one comes in.

Or the other line of thought is that its actually slowly getting better and Republicans will get credit when it does say in Jan, Feb of next year as the instruments of change.


Posted by: visionbrkr | August 5, 2010 5:32 PM | Report abuse

"When economic theory and politics collide" should have been in there somewhere. See definition of Chicago school of economics.

Posted by: tuber | August 5, 2010 5:32 PM | Report abuse

Many private companies are using the employees they have, forcing them to work overtime and take bigger workloads, rather than hire and train new workers. We need direct employment from the government, as Atrios argues, to get people earning and doing useful things, like painting black roofs white (for energy savings). My sister is a high level manager at the Census, and she says she has never had such a pool of qualified temp employees to do the field work. There are so many infrastructure and child/healthcare/para-educational needs that our federal government could pay for, but won't, thanks to bad economic and policy advice from Summers, et al.

Posted by: nancycadet | August 5, 2010 8:45 PM | Report abuse

This hypothesis is utterly bizarre because even if you thought it was intuitive you should be able to put numbers to it. For instance, you can do a quick straw poll of venture capital or even check small business organizations. The NFIB media focus has not been on the Employee Free Choice Act since it was killed in committee: Although they do harp about unions as they always do, but how many new business owners are not hiring because Craig Becker was appointed to the NLRB. My guess is they would say "who is Craig Becker and do you want to buy something we need the sales?"

Or you can point to job roles that are resilient against unionization - an analysis that can be easily accomplished with BLS data. You can also look at regions where unionization would never be a problem. Let's take Silicon Valley - which also meets the entrepreneur requirement... unemployment is over 10% and has increased year over year.

Or you can take numbers from the Kauffman Foundation, which focuses on entrepreneurship: Start-ups add a lot of jobs according to the report but they also average less than 10 employees for the first 5 years! Hardly breeding ground for wobblies.

Posted by: chrisgaun | August 6, 2010 1:46 PM | Report abuse

I look at it in terms of risk and growth potential. Do I open a factory here, where there is a large risk of union organization being supported by the government, and a union monopoly will destroy the business model? Or, do I open a factory somewhere else, where, even if there is union organization, they won't make my product so expensive as to be unsalable.

Let's say you want to open a factory that's going to be open for 50 years and you want it to be closer to your supply chain and customers. Where do you think there will be more growth in the next 50 years? USA or somewhere else? Most people are betting somewhere else. We are heading toward a slow-growth model. Unless we get radical and open up immigration, with reduced benefits and internationally competitive wages, we're all going to lose.

Maybe we need one of Paul Romer's charter cities here in the US.

Posted by: staticvars | August 7, 2010 11:58 PM | Report abuse

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