Today’s Jobs Report
Obama is droning on right now, in that stuffy, textbook, professorial tone he’s so good at. Is he offering anything thoughtful, helpful, or new? Not really.
So let’s see. Since September 2008 unemployment has been hovering between 8.5 and 9.5 percent despite the Federal government basically shooting it’s entire wad worth of “Stimulus”, both monetary in the form of massive infusions of cash via the Federal Reserve, through both low interest rates and Open Market Ops (QE1 & 2). Meanwhile the Federal Government has stuck by the other half of the Keynesian prescription, running tremendous deficits in the belief that spending = jobs.
But that simply is not the case. Pumping new money into the system will only stir some temporary growth until the full inflationary effects of that money become realized. Recently, Alan Greenspan noted that the Fed’s cash infusions had largely failed because all the new money was bottled up in banks which are not lending it out; i.e. a liquidity trap. I happen to think that’s almost a good thing because at least those banks are holding back the inflation flood gates. Meanwhile, the reason banks aren’t lending is because no one is borrowing. And why should they? The sensible thing to do in this economy is to limit risk, to retrench until savings levels recover enough to restore confidence and growth.
Meanwhile our leaders in Washington, unable to come to terms with their own fecklessness, sail the ship of state on the same course that Captain Roosevelt plotted that led is to 11 years of depression, that Ensigns Nixon, Ford, and Carter steered us on that led to a decade of “stagflation”.
The time has come to try something else. Only the bitterest and blindest of ideologues (funny how after every jobs report, after every bit of bad news, after every shred of evidence the Administration and its defenders find some excuse as to why their policies haven’t worked as advertised) can argue that the economic approach adopted by President Obama, that is, the basic Keynesian, anti-market prescription, has at worst been a disaster and at best been ineffective.
What is needed is a radical change of policy, at least from the last few years under both Obama and Bush. What is called for is a shrinking of Federal spending and interference in the economy and a return to steady and predictable monetary policy by the Fed. That, combined with structural reforms to reduce the costs for businesses, to get long term entitlement spending under control, and to modernize and simplify the tax code is what is needed.
Of course such a programme will not be costless. It will almost certainly a sharp drop in GDP and a spike in unemployment as businesses and individuals scramble to adjust. And at this point the patience of the public has worn pretty thin. But there is simply nothing else for it. Our current path is simply unsustainable and there is no reason to believe that anything will change as long as we continue to pursue policies that discourage the free and fair functioning of markets.
The economic sins that have gotten us to this point have been decades in the making. Both Republicans and Democrats have contributed to the debacle by distorting and damaging market disciplines to favor one group over another. The free market is a veritable job-creation machine. If President Obama wants to see unemployment come down then perhaps he could stop throwing monkey wrenches in to it.
