Politics Matter

June 1st, 2012 at 10:38 am

I see a lot of the wire reports on the lousy jobs release focusing on Europe, China, and other external factors to explain why employment growth once again appears to have decelerated.

Sure, European instability and a slower growing China are part of the problem.  But they are not at its core.  For that, we’ve simply got to look in the mirror.

The economic reason the job market is once again downshifting is because we as a nation failed to take out recovery insurance in the form of temporary stimulative fiscal policy against precisely the situation we now face. 

The President proposed the American Jobs Act back in September of last year for just this reason.  The economy in general, but especially the job market, has never reliably achieved “escape velocity,” i.e., consistently high enough growth rates that would set off the virtuous growth cycle of more jobs leading to more incomes, more consumption, which feeds back into greater demand, more jobs, etc.

And the thing that has blocked us from taking out the insurance we needed was and is political gridlock.  In fact, it’s worse.  Beyond gridlock, dysfunctional Congressional politics have led to self-inflicted wounds to the economy, wounds that are being freshly reopened with talk of going over the fiscal cliff, another debt ceiling fight, and the loss of extended unemployment insurance benefits for hundreds of thousands of jobless persons.

When politicians come to Washington not to solve our immediate pressing problems, not to compromise, but to promote, above the public interest, a narrow political agenda–when they do so regardless of the degree of hardship in the current economy…then I’m afraid we shouldn’t be surprised at our inability to self-correct.

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6 comments in reply to "Politics Matter"

  1. save_the_rustbelt says:

    Stall speed until January at the earliest.

    Brutal and nasty.


  2. Mike Hunt says:

    Jared you predicted the number BRILLIANT- I will always come to your site even though I am to the right of Paul Rand! I appreciate your view and although I disagree I like how you explain yourself – Free markets work – I feel our crisis was and will continue because we focus on the goal of gov’t programs rather than results.


    • Jared Bernstein says:

      Um…thanks, but I was way off…as was everyone else. I did, however, expect the number to come in below expectations…but not as much as it actually did!


  3. perplexed says:

    -”Beyond gridlock, dysfunctional Congressional politics have led to self-inflicted wounds to the economy, wounds that are being freshly reopened with talk of going over the fiscal cliff … the loss of extended unemployment insurance benefits for hundreds of thousands of jobless persons.”

    Compensate the victims or open the markets to bid-ask competition. Closed markets are not a form of capitalism, they’re a form of plutocracy. How is denying access to jobs not a denial of the Constitutional protections of the right to “life, liberty, & the pursuit of happiness”? If the pain were shared and the victims of these policies fairly compensated, the politicians would be facing a very different electorate and would have to actually pay a price for not representing these people instead of their campaign funders. Its not so much our Constitution that is failing us as it is our enforcement of its protections. Having the ability to stick this minority with the full costs of the output gap they create and extend with their policies is not something our oligarchs should be allowed to do without fully compensating them.

    If your continued election is based on campaign contributions (& superpack spending) and a small politically powerless group pays the price of you’re supporting your funders, where is there any incentive in this system to “self-correct”?


  4. Ralf says:

    The blandly neutral “dysfunctional Congressional politics” does not dare to name names. Ornstein and Mann do. As do I: the bulk of the dysfunction is in the GOP.
    Until that gets an open, realistic airing, the stimulative solutions we need are out o reach.


  5. Misaki says:

    >more consumption, which feeds back into greater demand, more jobs, etc.

    but… corporate profits were at $1.6 trillion last year! You would think that it means we have plenty of consumption, no?

    The missing link of course is that money that goes to the rich is less likely to be spent. Robert Reich has been using this point lately, and it explains why “fiscal stimulus” in the form of deficit spending (including taxes) has not been effective for long-term growth.

    Job creation without government spending, inflation, or trade barriers: http://jobcreationplan.blogspot.com/


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