It’s not so unusual for Jeremiah to agree with Paul Krugman. That is, we agree on the nature and severity of our employment problem, which Prof. Krugman frames poignantly in his editorial.
These dry numbers translate into millions of human tragedies — homes lost, careers destroyed, young people who can’t get their lives started.
By the way, if you don’t know that Friday’s employment report was dismal, we invite you to peruse table B-1 and discover where the 204,000 new jobs were created. One post calls them “dead end jobs,” while labor force participation continues its five year descent.
Krugman deserves credit for framing the problem. Many pundits seized on the headline number and declared victory. That’s propaganda. You will be better informed if you can keep track of which pundits are political shills.
We differ from the professor, however, on solutions. He seems to have dropped monetary stimulus, at last, but he is still promoting fiscal stimulus. His editorial also features a straw man, in the form of “debt scolds” unwilling to finance the stimulus.
There are two good arguments against further fiscal stimulus, one practical and one philosophical. We have already run trillion dollar deficits for five years, including the ARRA stimulus program. This approach isn’t working. One analysis found costs up to $500,000 to create a single job.
This brings us to the second argument, which is that we do not trust the federal government to administer a stimulus competently, or even honestly. We would prefer to have value producing jobs in the private sector, rather than Potemkin jobs in the government.
In clinging to the textbook approach, Krugman is, so to speak, “fighting the last war.” We differ from his approach because we have a different analysis of the root cause.
Keynes’ great insight was to reanalyze employment in terms of how entrepreneurs make decisions in the real world. Entrepreneurs today have different reasons not to hire than they did eighty years ago.
Happily, Prof. Krugman does not have to visit the real world. The Fed does that for us, in the form of their beige book survey. Entrepreneurs today are fearful of what they perceive to be an anti-business environment in general, and health care reform in particular.
Boeing tangles with the NLRB, and lays off 5,800 workers. J.P. Morgan tangles with the DOJ, lays off 19,000 workers. ANR tangles with the EPA, lays off 1,200 workers. We read stories like this every day in the business press. It’s not cause and effect, but it creates a climate of fear.
Real intellects know when to adapt their methods. If Keynes were alive today, he might just say, “let’s try helping the private sector, this time.”