On Wednesday, I wrapped up the class Iíve been teaching all semester: ďThe Great Recession: Causes and Consequences.Ē And while teaching the course was fun, I found myself turning at the end to an agonizing question: Why, at the moment it was most needed and could have done the most good, did economics fail?
I donít mean that economics was useless to policy makers. On the contrary, the discipline has had a lot to offer. ... But policy makers and politicians have ignored both the textbooks and the lessons of history. And the result has been a vast economic and human catastrophe, with trillions of dollars of productive potential squandered and millions of families placed in dire straits for no good reason.
In what sense did economics work well? Economists who took their own textbooks seriously quickly diagnosed the nature of our economic malaise: We were suffering from inadequate demand. The financial crisis and the housing bust created an environment in which everyone was trying to spend less, but my spending is your income and your spending is my income, so when everyone tries to cut spending at the same time the result is an overall decline in incomes and a depressed economy. And we know (or should know) that depressed economies behave quite differently from economies that are at or near full employment.
(So - here, he finally acknowledges that what we really need is JOBS - not welfare enticements to stay unemployed and not new regulations stifling business owners).
For example, many seemingly knowledgeable people ó bankers, business leaders, public officials ó warned that budget deficits would lead to soaring interest rates and inflation. But economists knew that such warnings, which might have made sense under normal conditions, were way off base under the conditions we actually faced. Sure enough, interest and inflation rates stayed low.
And the diagnosis of our troubles as stemming from inadequate demand had clear policy implications: as long as lack of demand was the problem, we would be living in a world in which the usual rules didnít apply. In particular, this was no time to worry about budget deficits and cut spending, which would only deepen the depression. When John Boehner, then the House minority leader, declared in early 2009 that since American families were having to tighten their belts, the government should tighten its belt, too, people like me cringed; his remarks betrayed his economic ignorance. We needed more government spending, not less, to fill the hole left by inadequate private demand.
(Well, Paul, in cased you missed it, we have had record budget deficits each of the six years since Obama took office - so it seems a little disingenuous to say they didn't know or try to make that work)
But a few months later President Obama started saying exactly the same thing. In fact, it became a standard line in his speeches. Nor was it just rhetoric. Since 2010, weíve seen a sharp decline in discretionary spending and an unprecedented decline in budget deficits, and the result has been anemic growth and long-term unemployment on a scale not seen since the 1930s.
So why didnít we use the economic knowledge we had?
(gee - Paul, I don't know, but least you realize the we still have a problem)
As we can see, the year before President Obama took office, the lowest unemployment number was 4.9 and it spiraled up to upper 7s.
Momentum carried it higher, and to his credit, President Obama, despite some in Congress vowing to thwart all of his initiatives, no matter how much it hurt the country, has been able to get it under control and steadily decrease it.
Unemployment hasn't been in the low 3s this century yet we have had some very good (better than decent) economic years.
It won't get that low because a lot of people don't want to work. I know several young people who continue to live with their parents and don't even look for a job.
For example, I can name a young lady ( 35 years old ) who has been a friend of my daughter for many years. She wears nice clothes, goes out to entertainment venues and such. She finished high school but never got a job or pursued higher education.
I am sure that we have many other people like this across our country.
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I got news for you - a lot of people are saying it is because a record number of people dropped out of the job market last month.
And also 6.3 is still nothing to brag about - it's abysmal - the average in a decent economy is the low 3.0.
Can I remind you - it's been almost six years now.
3.0 unemployment is almost unheard of. The only time it was that low was 1953 when it was at 2.9.
Since 1980, the lowest annual unemployment was 4.6 in 2007. Otherwise it fluctuated from 4.6 to 10.4 since 1980.. Even at the end of the Reagan presidency it was at 5.7. During his administration the nation had some of it's highest unemployment. 10.4 in 1983. This had a lot to due with the previous Carter administration and Reagan did right the ship but it's hasn't been all roses for the past 40 years. 3.0 is a great goal but not one that is realistic or common in our economy.
Dropouts continue to grow probably some of them can be attributed to people who have guit their jobs to retire since they can get Obamacare medical coverage.
Sad fact is that good jobs that are gone are gone forever and low
level jobs are the only ones available. Those people that had those jobs are gone. It's like the Detroit job market. Those jobs in Detroit are gone and will never come back.
I know of one professional who lost his job. Opportunities for his reemployment are basically nonexistent. His salary was healthy and will not be compensated by unemployment pay and food stamps. I would love to see some government numbers on how many high-paid professionals have been unemployed and what the cost of this situation is costing the economy.
Most jobs that are gone are because America labor priced themselves out of the market and the jobs were outsourced.
It has nothing to do with President Obama and especially nothing to do with Obamacare.
The reality is that Obamacare FREED people who were being held hostage by a job, simply to be able to obtain health insurance. Slave labor, plain and simple.
Gone forever are careers for life and the defined benefit retirement plans (corporate welfare). People these days need to be more mobile and willing to relocate. There are plenty of jobs, but Americans are too lazy to go after them. They want the factory job down the road for life like their parents had. Well guess what? Their parents generation outsourced them to other countries.