Wednesday, August 8, 2012

What Stimuli Would Help Now?

The July jobs numbers arrived last week, and are still stagnating.  Although only 163,000 net positions were added, it was the most in five months, and was significantly above the 125,000 to 140,000 needed to cover population increase.  The official unemployment rate rose - though only from 8.22% to 8.25% its rounding was announced as 8.3%, the first increase since early spring.  To its credit, the Obama administration did not spin the number of jobs added as positive.

As I mentioned last week, both sides are going nowhere on job policy now, with the liberals advocating only general stimuli.  That viewpoint was taken to an extreme in a Friday Slate magazine piece by Matthew Yglesias ( ).  It started well with the title "The Jobs Stall," and the beginning of the subtitle "for 18 months we've been on track to never return to full employment," but got disappointing, and whiny, with "why won't the Federal Reserve do something?"  The article itself offered few specifics on what this "something" might mean, so here are some possibilities.

First, a WPA-style infrastructure jobs project is badly needed.  The American Society of Civil Engineers estimated over two years ago that fully maintaining our bridges and highways alone would cost $1.2 trillion, a number that would be higher now.  With over 32 million Americans wanting to work full-time and not doing so, wages would not need to be anything like full union scale, and union members themselves would have plenty of work at their pay scales, especially supervising.  We don't have the choice of not keeping bridges and roads in good condition, unless we want to fall further behind (and we are behind) the rest of the Western and Pacific world on infrastructure, including airports, towers, and computer systems as well. 

Second, more unemployment benefits.  Even if you don't like stimuli in general, it is only common sense to see that putting money into the hands of those who don't have it will allow them to buy more goods and services, and largely will not be saved but spent.  True, longer and larger benefits discourage some people from working, but with opportunities so poor, and the median length of unemployment well over half a year now, the vast majority will be rightfully helped. 

So how about a general stimuli, giving almost everyone more money?  No.  Cheapening the dollar will hurt our prosperity, by making imports more expensive, and will not solve the problem, as the jobs crisis is permanent.  How about cutting interest rates further?  That neither.  They can't get much lower anyway - my interest-bearing checking account paid 0.05% last month - and large companies have more money now than they can constructively use anyway.  Extensive relief for those whose houses dropped in value?  Wrong again. We do not need even more encouragement for speculative investments on margin, and if people are working, their being "upside down" on a house they live in is not a problem of true national concern. 

Overall stimuli are not going to solve the problem.  Work's New Age has been caused by automation, globalization, increased efficiency, longer life expectancy, and additional largely good trends.  We can stimulate the economy by helping specific people in need, especially those without jobs, and by sanctioning work that must be done anyway.  If we spread money around more generally, we will only find that the money is worth less and less, with the lack of work as permanent as ever.  If Mitt Romney can articulate this as his position, he may indeed win in November - and the country will be better off.  If he cannot, it will be up to the voters, and the Obama camp, to stop us from seeing only more of same.

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