Long-term fixes needed
I think the real policy takeaway here, and in general from the events of 2007-2010, is that the anti-recession regime built after the New Deal could stand to use some tweaking. Some of the automatic stablizers either don't work as well as they did thirty or more years ago or aren't really as important any more. For a whole set of reasons, immediate direct employment is harder for the government to do -- but other options, such as a payroll tax holiday, exist now but didn't in 1930. Most importantly, state budgets are a mess and sabotage federal government recovery efforts.
I'm not exactly optimistic that a deal could be reached to get anything done on this right now. However, it does seem to me that Democrats, at least, should have this much higher on their agenda than they do now. It does seem likely that some sort of triggered reactions, with a mix of temporary tax cuts, increased benefits to those who need them (and, importantly, to those who would spend money when the economy needs it), and some sort of deficit-swapping plan with state governments should be on the table.
Given that an ideal Democratic plan would probably involve a fair amount of stuff on the tax side, and given that most governors, including GOP governors, might lobby for the right type of state budgeting scheme, I'd say it's even possible something could pass in the next two years -- if the Obama administration pushed for it, and if one or more Democrats in the Senate took it up as a cause. But even if it goes nowhere for now, it's an issue that won't go away any time soon. This -- and not budget deficits -- is in my view the Big Kahuna of Important Long-Term Stuff That Our System Doesn't Handle Well.
| December 29, 2010; 3:41 PM ET
Categories: Economy / unemployment
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