Kthug points out the shocking fact that no one seems to care about unemployment:
Not long ago, anyone predicting that one in six American workers would soon be unemployed or underemployed, and that the average unemployed worker would have been jobless for 35 weeks, would have been dismissed as outlandishly pessimistic — in part because if anything like that happened, policy makers would surely be pulling out all the stops on behalf of job creation.
But now it has happened, and what do we see?
First, we see Congress sitting on its hands, with Republicans and conservative Democrats refusing to spend anything to create jobs, and unwilling even to mitigate the suffering of the jobless.
We’re told that we can’t afford to help the unemployed — that we must get budget deficits down immediately or the “bond vigilantes” will send U.S. borrowing costs sky-high. Some of us have tried to point out that those bond vigilantes are, as far as anyone can tell, figments of the deficit hawks’ imagination — far from fleeing U.S. debt, investors have been buying it eagerly, driving interest rates to historic lows. But the fearmongers are unmoved: fighting deficits, they insist, must take priority over everything else — everything else, that is, except tax cuts for the rich, which must be extended, no matter how much red ink they create.
And about those bond vigilantes:
In the WSJ, Gregory Zuckerman has a report on all the big name investors who are now positioned to bet on deflation. Among the big names: Bill Gross, David Tepper, and GMO LLC.
But this isn’t that surprising, given that the “Big D” has been all the rage of late, reaching a fever pitch last week when St. Louis Fed president James Bullard dropped his big paper on the subject.
What’s interesting is that it wasn’t all that long ago when all the cool kids were betting on inflation. Paolo Pellegrini — John Paulson’s old hand — has been warning about inflation for awhile, and at least not long ago was short Treasuries, arguing that the massive funding needs of the US would necessitate more printing and higher interest rates. Whoops.
It’s almost like our government is set up to cater to a narrow brand of special interests and preserving the wealth and status of the select few.
Violet
Well, that’s a shocker. And it worked so well for the French before that pesky French Revolution.
Nick
If we just kick all the Mexicans out and stop the mosque at Ground Zero, that will solve the problem.
In all seriousness though, there seems to be two schools…those who don’t want to do something and those who want to do something but are politically incapacitated by those who don’t because of our ridiculous archaic comity form of government.
Couple that with the absurd number of people who wrongly believe the deficit is causing unemployment (thanks Fox), and what you got is a government that feels no need to serve the people because they don’t want it to serve them.
MikeBoyScout
It’s almost like our government is set up to cater to a narrow brand of special interests and preserving the wealth and status of the select few.
Seriously John?
Of course our government is set up and usually runs for the select wealthy few!
Did you forget that at our inception the select few were white male property owners? Africans were slaves, native Americans were savages, and women were chattel.
Progress towards where we are was only made with struggle; constant and often bloody struggle.
All too often in the 21st century We the People seem to think rational, reasonable policy will be delivered without effort.
Get with the program. The wealthy narrow brand of special interests are intent upon breaking the backs of working people. They intend to push their advantage until we submit.
They intend to make unemployment and disenfranchisement the new normal.
And until we do more along the lines of aggressively fighting it, they will continue to win.
A People’s History of the United States: 1492 to Present – Howard Zinn
Nick
@Violet:
Well, it did for a couple hundred years. Maybe we can get a revolt in like 2355.
JGabriel
Best comment on that BusinessInsider post:
.
General Stuck
Well, yea. This is the pinnacle of trickle down theory that has ruled the roost in DC since 1980. It is entrenched in the DC matrix of governance and will not be changed overnight.
I disagree about unwilling to spend “anything” to create jobs, maybe not the kind what Krugman hopes for, but there has been government spending galore. Krugman doesn’t discern that ALL spending by the government is stimulus, and seems to be stuck on spending that creates temporary infrastructure work as the only kind of stimulus that matters.
Here is where Krugman is mixing politics and optics with econ theory. I think he is worried about electoral politics in the short term more than anything. And this is okay, because it is important politically for dems to stay in power. And he should delineate dems from wingers on the whole, as not willing to spend more for the safety net and unemployment bennies. Of course there is Ben fucking Nelson, who is full on gooper these days. But most dems want to increase the safety net. They are being blocked by the wingnuts however.
Frank
I would listen to this argument IF these same people also were willing to look at all spending from our government, including defense spending. But for whatever reason, these people have no problem with defense spending which amounts to thousand times more money than the unemployment costs. Our country is already spending as much on our military as the rest of the world combined. And we seriously can’t cut ANYTHING from our military budget?
In other words, it is sheer hypocrisy. As Dick Cheney stated back in 2001, “deficits don[‘t matter”.
Bill E Pilgrim
@Violet:
Er, and to some degree well after it also. Ever heard of the ENA?
Keith
I can’t recall who wrote it (recently…I want to say it was Dana Milbank), but what has come out in the last several years is that what he (and the GOP) *really* meant to say is “deficits caused by tax cuts don’t matter.”
Frank
@Keith:
If this is what he really meant, then I guess he and the rest of the GOP are at odds with each other. It is Bush’s tax cut that are the biggest reason for the current deficits. And if we are to believe Cheney, it doesn’t matter. So maybe the rest of the GOP needs to have a word with Cheney.
Keith
@Frank: The GOP will never admit that the Bush tax cuts are the main cause of our deficits. It really doesn’t conflict much with Cheney said, as Cheney was responding to Paul O’Neil on the issue of the tax cuts. The party did and still does believe that these tax cuts pay for themselves, regardless of what the CBO says.
Linda Featheringill
John: What are you? Some kind of effing socialist? :-)
Linda Featheringill
[This is a repeat post because I forgot to mis-spell the S-word and the moderation Nazi stole my comment.]
John: What are you? Some kind of effing soshulest? :-)
J
Come on folks, fair is fair. It was the last century that was the century of the common man. This one is the century of our pampered, cosseted, fawned-upon ruling class. Ordinary people should wait their turn.
Alex S.
Krugman has become my favorite blogger. He combines opinion and facts as well as noone else. It is amazing how sloppy his opposition is and how badly they treat data. And it’s also amazing how often Krugman has been right and how little the Serious People listen to him. Inflation… doesn’t happen. Interest rates… down. Jobs… gone. GDP growth… slowing down just as the stimulus funding is running out. Krugman has said that this would happen since the beginning of 2009.
And all this talk about “confidence” is making me sick. I have free access to the WSJ and when I’m bored I read it and many times, it’s a parade of pleas for austerity, painful measures and cuts especially in the social net (they never mention other areas of spending). And yet, when you look at it globally, countries with bigger social nets have weathered the crisis better than others (especially Germany and Sweden). While those “dynamic” economies like GB and USA have suffered far more. And countries that followed the austerity road only experienced a further deterioration (Ireland, the baltic countries). These people also thought that Greece would default, that Hungary would condemn itself by rejecting the help of the IMF (only in exchange for cuts to the social net) – yet the forint gained value after their decision. It is stupifying how upside-down the discussion is.
Kevin
It’s almost like our government is set up to cater to a narrow brand of special interests and preserving the wealth and status of the select few.
Charles and Mary Beard said it first.
Frank
@Keith:
And not just the CBO; just about any economist will agree that your average tax cut will only give back a certain percentage to the government. They will never repay themselves 100%. And this is why bush’s tax cut were so insane. They were not accompanied by any type of reduction in government spending, thus ensuring our deficits today.
daveNYC
Yep, although in this instance, I’m not even sure whose interests government is protecting. Deflation hurts all asset owners, and rich people tend to own a lot of assets. A deflationary spiral is also rather difficult to get out of, and things could get bad enough that people break out the pitchforks (right after Dancing with the Stars finishes).
I’m just not sure why the government seems to be intent on an economic policy that leads towards deflation. Nobody comes out ahead (the guys setting up positions to benefit from it could just as easily take positions to benefit from inflation), and it’s difficult to control.
The other thing I don’t understand about this is why people aren’t angrier about the situation. U-6 is at 16.5%, that’s a lot of people with time on their hands and not a lot of money.
numbskull
It has been a perfect storm for me this morning. First I read over at Crooks and Liars that Greenspan has come out and said that it would be lunacy to extend the Bush tax cuts. OK, better late than never, but OK. Then I go to the BBC website and see that they cover the same Greenspan interview, but oddly enough, they don’t mention his newfound wisdom on ending the tax cuts. They instead focus on Greenspan saying that high unemployment may not be fixable because the underlying reasons for it are systemic. Ruh-roh. I smell a new beltway meme. Really. I figured it out on my own this one time.
Then I come over here and read this, which directs me to Krugman. And what is Krugman saying? Watch out for insiders declaring that there is no fix because the problem is systemic.
See how that works? Greenspan says something that is now so obvious that you just can no longer be taken seriously if you don’t agree (this being, the Bush tax cuts must be allowed to expire), but then he slips in the new meme. We all get excited about Greenspan! Even Alan Greenspan finally, finally says that the Bush tax cuts must die! But what does the MSM report? Why, of course, they report that The Oracle has declared that there is no fix for high unemployment! It’s systemic. We’ve somehow become too stupid to fix it!
General Stuck
Oh, we can fix it, but it will take much much more than government spending. Currently, we are not only doing nothing to stop jobs from being outsourced overseas, we are actually encouraging it will all kinds of tax incentives. Then there is the whole offshore tax haven scheme, and the list of self fucking policies continues on as a result of winger single focus for 30 years on nothing, and I mean nothing, but corporate bottom lines. There is so much to fix, it is hard to be optimistic that anything other than complete economic collapse will garner the political will to make the changes. And even then, while standing in the soup line, the tea tard next to you will likely be holding a sign claiming soshulist liberals hate big bidness
roshan
So what kind of problems we have here:
1. Political: Two party system, different approach to gov’t, compromise unlikely.
2. Economical: Competing theories, some based on ideology, some based on market dynamics, others untested.
3. International Trade: Global trade seems to undermine worker base at home, unfair competition, wage decline and stagnation, trade deficits,
4. Taxation: Levels seem low when compared to previous eras, both individual and corporate. Correction needed.
5. Market base: manufacturing, service providers and financial markets. The latter seems to have acquired more heft and gov’t backing, while the former have declined in numbers and scope.
I just wanted to list the problems, since it helps me to think before I reach out for solutions or even think of some myself.There are likely more problems than identified above, but I wanted to focus on the most urgent ones.
If anyone has something to add/delete/correct to the above, please suggest. I am just thinking out loud.
Also, if anyone can suggest solutions to the above problems, please do so.
Tsulagi
Well, at least it’s becoming more transparent.
Seanly
@Violet:
Yup.
I wish I could remember more details, but a few years ago, someone can out with a paper showing the cyclical nature of accumulating wealth and reform/revolution. Followed it from 1650’s in Denmark IIRC or something like that. It wasn’t Kondratiev waves though the end result was the same.
Basic premise is poor people get screwed by rich, things get so unbalanced that poor people revolt and change system, rich people slowly change system back. When’s our revolution coming?
numbskull
@roshan:
I disagree with this statement of a problem. First, it’s arguable that we only have a one party system: Corporatist. Second, to the degree that there are two wings to that party, the system is set up to force compromise too much. What is the Healthcare Insurance Reform bill if not one gigantic steaming pile of compromise? Same goes for Wall Street Reform.
Lack of compromise is not the problem.
Karmakin
My guess?
My guess is that there are some shadowy individuals (in that they lie like a rug), who are trying to “prep” the economy for the labor shifts post-boomer retirement. That means to lower the employment level, so when the employment level starts to rise again due to demographics and age distribution, employment won’t get too high.
Why? Because they’re dumb and believe that higher wages always cause inflation. It’s like free market pricing never happens and prices are set strictly by costs. Costs may set a floor for prices. But the problem isn’t the floor. It’s the ceiling.
Nick
@daveNYC:
The other 83.5% are doing just fine thank you.
Brachiator
I’m shocked, shocked to find that coddling the oligarchy is going on in here!
I wonder. Do any reporters confront Republican politicians with Greenspan’s statement?
roshan
@numbskull:
I agree with the substance of your reply. Since I am looking from outside and come election time there are most likely two major parties on the ballot, is the reason I wrote it that way. The thing about compromise…., in fact what you wrote is correct too. Healthcare was a big compromise and in fact a step or two backwards for pro-choice supporters.
Since our problems with the economy and unemployment are urgent and the fact that a large part of healthcare bill doesn’t kick in for like 2 more yrs or so, the compromise we need is towards political efforts towards the economy. And that’s where the conservative party is simply unmovable since they are betting their November fortunes on a bad economy.
ThatLeftTurnInABQ
@daveNYC:
It is very difficult to fight deflation to anything better than a standstill because the size of the bubble was so large and it ran for so long that the amount of credit created during the bubble was staggering, and it is the shrinkage of the credit supply, not the money supply which is driving deflation. Even with the passage of time (17 months to be exact) it is hard to improve on Steve Keen’s Roving Cavaliers of Credit for explanatory power.
The FDR legacy safety net is doing what it was (partially) designed to do – save capitalism by cushioning the blow. The New Deal took the worst off of the immiseration during the Great Depression, but what finished off the GD for good was the full employment created by the Second World War and subsequent income and wealth transfers driven by the very high marginal tax rates required to pay for the war debt, which moved much of our national wealth down the income ladder and put it into the hands of consumers who would spend it rather than hoarding it.
We haven’t reach the latter stage yet, and given contemporary politics I’m not sure we ever will until the party of the neo-Confederate South rejects their current alliance with Wall St. and big business and turns populist.
ETA: and by that I’m mean truly populist (aka hang the banksters from lampposts populist), not the faux populism of the Tea Party organizers.
Splitting Image
I may be dumb, but if deflation is becoming more and more of a concern, doesn’t it make sense to switch from fighting the deficit to fighting unemployment? The best way to combat deflation is to increase consumer demand, and the best way to do that is to get more people working.
Brachiator
@ThatLeftTurnInABQ:
Are you saying that we need another World War to rescue the economy?
I’ve seen people continually assert that high marginal tax rates moved wealth down the income ladders. I’ve never read anything that makes a convincing case for this.
High marginal tax rates went into effect in 1932, the last year of the Hoover Administration and didn’t do squat for the economy throughout the 30s. And ignoring the postwar productivity boom, as factories shifted from war to domestic production, to focus on consumption seems odd.
And how, exactly, did high marginal tax rates put more money into the hands of consumers? It couldn’t have done so directly, since there were direct cash payments to citizens.
Both Britain and the US have had periods with high marginal tax rates. And during these same periods there have been recessions, high unemployment, low wages or wage stagnation. I am not against a progressive tax system, but I’m not seeing a magical solution here in high marginal tax rates.
JGabriel
@numbskull:
Might have been nice if he’d said it was lunacy to ever enact them in the first place. Circa 2001 or 2002.
JGabriel
@Splitting Image:
Keep talking like that and someone might call you, god forbid, Keynesian.
Sacre Bleu!
.
El Cid
By the way, you get much more of your money’s worth by increasing the ‘jobs net’ than you do the safety net. Not that it would happen, but public jobs are a much better way of supporting the unemployed than aid benefits.
BrianM
The Roman Oligarchs did some good foundational work on using bread and circuses to maintain their position. Because they lacked things like algebra and a non-lame number system, they couldn’t optimize the amounts.
Think of America as an ongoing experiment to find out how low you can lower the “bread” part if you crank up the “circuses”.
D-Chance.
BTW, I’m sticking by my prediction: This country will no longer exist in its current form with its current boundaries by 2040. We’ll have a blood-in-the-streets shooting Civil War II by 2020. It’s bad enough when the extreme wings are calling for it; now, we have so-called “law enforcement” engaging in seditious language.
Grab the popcorn and beer, kiddos; it’s only going to get worse. And, at this point, there’s no bringing back anyone from the edge… they’re in full stampede mode and the war in on. And, yes, they WANT it. They’re fucking BEGGING for it.
General Stuck
@El Cid: I doubt that. Temporary public works jobs will likely only help a few tens of thousands and a few companies. Given there is politically a finite amount of cash that can be passed out of congress, using that money for safety net would help all those out of work, instead of the lucky few who happen to land a temp PW job, leaving millions high and dry.
edit- and the stimulus effect of safety net money is immediate, PW jobs is not.
Ruckus
@Splitting Image:
Ahh grasshopper, you have much knowledge.
Too bad no one who can do anything about this is listening. Or seems to care. Or figures that this might, just might be in their best interest as well.
Ruckus
@D-Chance.:
You didn’t think most cops were liberal, progressive, rights loving people did you? The folks who love them there tazers? The folks who will throw on the ground and taze or beat or shoot you in the back, or all 3 for talking back?
gene108
From Krugman’s article.
I had a long talk with my brother this weekend on politics. My brother works for a bank in NYC. He basically believes the above. Businesses now hate Obama and are willing to sit on their cash and ride things out until 2012, since they don’t have an incentive to invest their money because of uncertainty about new laws.
From talking with him, I think part of it is as Krugman points out. The reality of what the White House and Congress are proposing, doesn’t match the fears of the business community. But one thing my bro’ did point out is there has been some massive new legislation passed, which effects how businesses will operate in the future and there’s very little guidance on how those laws will be implemented.
I think the business community now feels Obama’s a communist / socialist / listens too much to the hard core leftists, who think profit is a dirty word and all corporations are evil and because of this believe there isn’t anything Obama won’t tax, regulate or interfere with.
I’m not sure how Obama’s managed to work himself into such an unenviable position, where his former supporters – the folks in business, who decided he was better than McCain and Republicans and the liberals, who thought he’d “give them a pony” – have basically decided he’s a communist and corporate-whore, respectively.
There’s a serious messaging problem with the Obama White House. They aren’t getting people behind them, like they should and I really do wonder, if businesses are going to refuse to invest until 2012 because they aren’t getting everything they want.
ThatLeftTurnInABQ
@Brachiator:
It was govt spending by the post-WW2 admins (especially the Eisenhower admin) which put money into the pockets of the middle income tiers and drove the economy out of the post-demobilization recession of the late 1940s. This took many forms – the GI bill, highway and water projects construction, military industrial complex spending, post-Sputnik spending on scientific research and engineering. The high marginal tax rates were what help to finance this spending so as not to create larger deficits, and as a result the deflationary effects of high tax rates were not felt nearly as strongly as they would have been if these taxes had not been highly progressive in structure.
Essentially the post-WW2 US govt acted as a giant pump, moving low velocity (i.e. stagnant) money out of the hands of the highest income and wealth brackets and down to a lower level. Without that effect, we would have returned to a depressed economy after the war was over. The latter is exactly what happened for a short time in the late 1940s, but the combined effects of import demand from other parts of the world (in many cases subsidized by the US govt via loans and grants), the Cold War, the Korean War, and internal infrastructure development (e.g. the interstate highway system) got our economy out of the deflationary ditch.
The Eisenhower admin pursued a highly Keynesian economic policy, but most observers don’t notice this because they also emphasized balancing the budget. The high marginal rates in that era allowed them to do this.
azlib
@Frank:
Of course it is hypocrisy. But all this is magically thinking anyway. When you have a world where people vote against unemployment insurance extensions at a cost of about $38B because it needs to be paid for and at the same breadth want to extend tax cuts with a price tag north of $1T for the next 10 years without paying for them, you know you are in cloud cuckoo land.
In a rationale world, we would extend the tax cuts until the economy got back on its feet and add another $600B to direct fiscal stimulus to keep the economy from sinking into deflation which is extremely difficult to fix. But our political world is not rationale.
liberal
@Ruckus:
My impression is that much of the law enforcement community in AZ doesn’t like the AZ law because it puts them in a very difficult position.
liberal
@ThatLeftTurnInABQ:
Discussions of marginal tax rates are pretty much useless without accompanying information on what comprises taxable income. (Not to mention things like what the brackets were.) I guess something like the average or effective tax rate would be better.
IIRC there was a long period with pretty high marginal rates, but in the computation of taxable income, capital gains were first multiplied by 0.60 before being added in.
bcinaz
If tax cuts create jobs, then where are the jobs? Since the bushtaxcuts were rammed through Congress, 8 million jobs have disappeared.
Where’d they go?
Ruckus
@liberal:
From what I understand you are probably correct. I was pointing out the general nature of a lot of cops not just those in AZ.
Ruckus
@bcinaz:
Into the pockets of the people who paid to get them passed.
phillygirl
Our political leaders don’t just drop from the sky to torture working Americans. They are chosen by working Americans. I’m kinda sick of Krugman’s hand-wringing over special interests and governing elites and unspecified others who supposedly spend their days pulling marionette strings in D.C. We’re the ones who elected the fucking marionettes. The latest poll of Kentuckians, for instance, shows that they want a senator who disparages the unemployed, tells poor people that they’re lazy, and cheers for an industry that savages the landscape and kills its workers. So that’s what Kentuckians will get. It’s what we’ll all get. I am going to drink heavily tonight.
Brachiator
@ThatLeftTurnInABQ:
I had to go out and take care of some business. Thanks for this.
The GI bill did not directly put money into people’s pockets, and the other items you cite were a small part of post WW2 economy. It also mixes what happened in the 40s with later spending.
You also ignore the fact that high marginal tax rates didn’t do much from 1932 to 1941 (the actual war years are too complex to do comparisons).
This is an interesting idea, and as I have time I will look for more economic analyses, but the joy of high marginal tax rates sounds more like conventional wisdom than anything accurately describing the impact of taxes on the economy.
@liberal:
Yep. I think that one of the sources people use when they talk about this can be found at this link:
http://www.truthandpolitics.org/top-rates.php
But even though this is very schematic, the site notes that during some years, the maximum rate was limited by “statutory net income.” And even here you don’t know the actual effective tax rate that people paid once you take deductions and loopholes into account.
El Cid
@Brachiator: The requirement that tax policies on upper-incomes must show a relationship with ‘putting money directly in the pockets of the middle class’ is very, very strange. I have no idea why that would be significant.
The question, however, of the relationship between marginal tax rates on income and actually paid taxes is interesting and has been argued about much in the scholarly literature.
Brachiator
@El Cid:
ThatLeftTurnInABQ makes a claim about the utility of high marginal tax rates in moving “much of our national wealth down the income ladder,” not me, so I’m not the one who can answer your question about whether or not it is significant.