According to nearly everyone running for office, we are now in a "jobs crisis."
Even with all the attention on hiring, the government's ability to create jobs is pretty dispiriting, no matter who is in charge. One reason we have so few ideas about job creation is that up until recently, the U.S. economy had been growing so well for so long that few economists spent much time studying it.
With no new theories, Democrats dusted off the big idea from the Great Depression, John Maynard Keynes’s view that government can create jobs by spending a lot of money. The stimulus, however, has to be borrowed, and it has to be really, truly huge — probably something like $1.5 or $2 trillion — to fill the gap between where the economy is and where it would be if everyone was spending at pre-recession levels.
Many Republicans follow the more fiscally conservative University of Chicago School, which argues that Keynesian stimulus can’t heal a sick economy — only time can. Chicagoans believe that economies can only truly recover on their own and that policy interventions only slow the recovery. It’s a puzzle of modern politics that Republicans have had electoral success with a policy that fundamentally asserts there is nothing the government can do to create jobs any time soon.
Of course, Romney, Perry, Herman Cain and the rest won’t come out and say, “If elected, I will tell you to wait this thing out.” Instead, Republican candidates fill their jobs plans with Chicagoan ideas that have nothing to do with the current crisis, like permanent cuts in taxes and regulation. These policies may (or may not) make the economy healthier in 5 years or 10, but the immediate impact would require firing a large number of America’s roughly 23 million government workers.
An area of agreement that is the most important: an economy is truly healthy only when its people know how to make and do things that others will pay them a decent amount for. Jobs, in other words, are not the cause of a healthy economy; they’re the byproduct. And that’s another thing most national politicians know but will never say.
An economic downturn is a great time to learn things — carpentry, say, or aerospace engineering — that others will eventually pay for: high-school dropouts should get their degrees and a year of specialized training; high-school grads who can’t afford a four-year school should get a community-college degree. Life will be tougher for liberal-arts majors if they don’t get training in how to apply a humanities education. Those who can’t find a job where they live should consider moving to places where there are more jobs than applicants — the Dakotas, Nebraska, Wyoming.
Source: The New York Times Magazine, November 6, 2011
For how past U.S. presidents faced a speculative bubble that had burst along with a banking crisis, click here.
Carmen M. Reinhart: This Time Is Different: Eight Centuries of Financial Folly
Robert R. Prechter Jr.: Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression