The National  Memo Logo

Smart. Sharp. Funny. Fearless.

Monday, December 09, 2019 {{ new Date().getDay() }}

With our best job reports looking like Clinton’s worst, now isn’t the time to pivot to deficit reduction.

Steven Pearlstein is concerned there’s too much emphasis on getting unemployment down and not enough on pivoting to deficit reduction in the states. Krugman has a good response; I want to focus on two specific parts of Pearlstein’s post. The first:

There are some on the left who also cling to the view that the economy is stuck in a depression — lest it undermine their critique about the woeful inadequacy of fiscal stimulus and the desperate need for more.

Let’s start with some basic facts: Monthly job growth was over 250,000 in just over half of the months during Bill Clinton’s presidency. In the other half, the slow months, the average job growth was around 154,000 per month.

Knowing that is what healthy job growth looks like, the meek jobs numbers we are seeing — last month’s was 243,000, and the high end estimate for this month is 250,000-300,000 — looks like it may be approaching a period of solid growth. But with so much potential downside (Iran, Europe, etc.), why would we want to stop expansionary monetary and fiscal stimulus?

Steven Pearlstein notes, “The data points for this optimism are to be found in recent reports on private payrolls (averaging just under 200,000 jobs per month for the past year).”

Notice the “private” payrolls — total job growth is actually 160,000 averaged when you take into account the shedding of government jobs through 2011. Which is to say our economy at its strongest looks close to the Clinton economy at its weakest.

Using this handy Atlanta Fed Jobs and Unemployment Calculator, at 160,000 average jobs per month it will take until 2017 to get to 5 percent unemployment. At 300,000 average jobs per month it will take two more years.

The second:

There is no denying that an official unemployment rate of 8.3 percent is too high and understates the weakness in the job market. But too much of their gloomy analysis is based on a misguided assumption that it’s possible to put the nation on a sustainable growth path without making the painful but necessary structural adjustments required to an economy left badly out of balance by the Bubble Economy…

It is the restructuring and right-sizing of the public sector that, as a practical political matter, only happens when the fiscal pressure is on. It can easily be phased in without throwing the economy into recession.

This “structural adjustments” part is frustrating because it isn’t clear what he is talking about (until you get to the second paragraph). Is the issue the idea that the capital markets think the debt is out of control? Workers can’t be retrained? Hysteresis? There are ways of quantifying each of these arguments and they have their strengths and weaknesses. An incredibly generous argument about structural unemployment would say that we might hit problems closer to 6 percent than 4 percent, and even then we are still far away.

The second paragraph is similar to Richard Fischer’s argument against QE (and Naomi Klein’s Shock Doctrine too) — if growth takes off, we can’t make the hard decisions necessary for the economy. At 6 percent unemployment, crafting state budgets won’t be any easier — better to do whatever is necessary now, while in a crisis.

I don’t agree with the idea that state budgets will be significantly easier to deal with at full employment in theory, but I also don’t see this working in practice. Is there any evidence that state governors who attack workers to fix the budgets aren’t turning around and cutting corporate taxes by a larger amount over the long run? That’s what is happening is Wisconsin. Shock times aren’t about responsibility — they are about power shifts.

Mike Konczal is a Fellow at the Roosevelt Institute.

Cross-Posted From The Roosevelt Institute’s New Deal 2.0 Blog

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

Advertising

Start your day with National Memo Newsletter

Know first.

The opinions that matter. Delivered to your inbox every morning

Rep. Ted Budd, left, and Cheri Beasley

On Tuesday, North Carolina Republicans selected Rep. Ted Budd (R-NC), a far-right extremist who has pushed false claims about the 2020 election, to be their Senate nominee. He will face Democratic nominee Cheri Beasley, a former chief justice of the state's Supreme Court.

As of Wednesday morning, Budd had received more than 58 percent of the GOP primary vote. Former Gov. Pat McCrory received just below 25 percent of the vote, while former Rep. Mark Walker received about nine percent of the vote.

Keep reading... Show less

Stephen Colbert

It seems we can't go even a week in America without some deranged white nationalist shooter taking the lives of decent people. Of course, this type of violence is propagated on a daily basis by the far-right sh*tweasals at Fox News and, worse yet, in the ranks of the Republican Party.

After returning to the Late Show helm, Stephen Colbert weighed in on the real culprit behind the mass shootings -- the Replacement Theory popularized by Tucker Carlson.

Keep reading... Show less
{{ post.roar_specific_data.api_data.analytics }}