In 2009 there was the Keynesian moment. With the economy shedding hundreds of thousands of jobs a month, with the financial system imploding and GDP crashing, the US government stepped in with a stimulus bill designed to get spending started, to boost the states, and to invest for the long-term. At a spending level nowhere near the challenged, President Obama still managed to oversell what it would deliver. By 2010, with unemployment still high, Democrats would silently walk away from the entire endeavour.
This lead to the counter-Keynesian assault of 2011-2012. Politically lead by the Tea Party in Congress, the issue became one of austerity to boost economic confidence, focuses on so-called structural unemployment leaving our workforce unprepared for the jobs that were available, and a terror over the idea that debt reaching 90 percent of GDP would slow the economy permanently.
This wave, in turn, collapsed in early 2013. Studies, like the famed Reinhart-Rogoff paper, that captivated the press turned out to have serious errors and were seen as oversold given their shaky foundations. The short and medium term deficit collapsed, but lead to no sudden wave of investment or growth. The worries about unemployment fell with collapsing inflation.
This has not lead to a new moment. Into this void steps Dean Baker and Jared Bernstein’s Getting Back to Full Employment: A Better Bargain for Working People (available as a free e-book at that webpage). This short book walks through the economic arguments for why low unemployment is a key goal for the immediate economy, and how we can get there with the tools we have.
The book proceeds to show that the late 1990s had significant wage growth, a sudden and important reversal of stagnating trends that existed 20 years before and 10 years after then. They then link this not to deficit reduction, or welfare reform, but instead to the macroeconomic effects of Federal Reserve actions.
They also show ways forward, including more aggressive Federal Reserve action, actions that would also act as insurance against potential future recessions. Work sharing, reducing the trade deficit, the government acting as an employer of last resort to do useful investments, are all potential avenues.
This is a policy focused work, and the arguments are very persuasive. Full employment needs to be one of the core goals of liberals everywhere. The question that remains is why isn’t it? Why has there been so much focus on Grand Bargains and deficit reduction? Should elites and the rich support full employment as well, or do they prefer a slightly weak economy?
Or, to put it in other words, who are the enemies of full employment, and what motivates them? That’s where I’d like to start with comments.
[As a courtesy to our guests, please keep comments to the book and be respectful of dissenting opinions. Please take other conversations to a previous thread. - bev]