Does Washington Care About Unemployment?

Today I would like to comment on an interesting article from an unexpected source. Writing at theweek.com, liberal economist Brad DeLong asked a pertinent question: Does Washington care about unemployment? Sadly, he is forced to conclude that Washington doesn't appear to care.

Today, the unemployment rate is kissing 10 percent. Global financial markets are sending us a message that the excess demand for high-quality financial assets is growing again.

Yet, unlike 1983, there is no sense of urgency in Washington.

The policy response when the market wants more safe assets is simple: Give it what it wants. In early 1983 the Federal Reserve frantically expanded the money supply to give the market the cash it wanted. The U.S. Treasury frantically printed huge, honking tranches of Treasury bonds for the private sector to hold. The hope and expectation was that satisfying the demand for high-quality financial assets would relieve the excess supply of goods and services and workers. That expectation was duly realized. The unemployment rate, which had been 10.8 percent in December 1982, fell to 8.3 percent by December 1983. Come Election Day, November 6, 1984, unemployment was down to 7.2 percent. It was morning in America.

Nothing comparable is under way today.

DeLong discusses the apparent lack of concern about joblessness Inside The Beltway, and what he thinks the right policy responses should have been. This leads him to ask some fundamental questions—

Why the enormous disconnect?

Some wise senior Democrats have told me to calm down...

But whenever I wander the halls of Washington these days, I can’t help but think that something else is going on—that a deep and wide gulf has grown between the economic hardships of Americans and the seeming incomprehension, or indifference, of courtiers in the imperial city.

Have decades of widening wealth inequality created a chattering class of reporters, pundits and lobbyists who’ve lost their connection to mainstream America? Has the collapse of the union movement removed not only labor’s political muscle but its beating heart from the consciousness of the powerful? Has this recession, which has reduced hiring more than it has increased layoffs, left the kind of people who converse with the powerful in Washington secure in their jobs and thus communicating calm while the unemployed are engulfed in panic? Are we passively watching an unrepresented underclass of the long-term unemployed created before our eyes?

Go, Brad! But then we are disappointed, for his answer to these insightful questions is—

I don’t know. But this unseemly calm does astonish me.

I don't know? C'mon Brad, does a bear shit in the woods?

Mr. DeLong: raise your right hand palm out and put it in front of your face. Now wave your hand as if you were waving to a friend. OK now, Brad, can you see your hand? If you can see it, then the answers to your questions

Are we passively watching an unrepresented underclass of the long-term unemployed created before our eyes?

Has this recession, which has reduced hiring more than it has increased layoffs, left the kind of people who converse with the powerful in Washington secure in their jobs and thus communicating calm while the unemployed are engulfed in panic?

Have decades of widening wealth inequality created a chattering class of reporters, pundits and lobbyists who've lost their connection to mainstream America?

are YES, YES and YES!*

Indeed, I was listening to some of those chattering courtiers (reporters, pundits and lobbyists) on today's NPR's Morning Edition, which is broadcast daily from our Imperial Capital. They presented a Fair & Balanced report on the need for Financial Reform. We were told that the banks had spent hundreds of millions of dollars lobbying Congress to influence reform legislation, but we were also told that banks are inherently "risk-taking" institutions—

Economist Robert Litan, vice president for research and policy at the Ewing Marion Kauffman Foundation, acknowledges that bank lobbyists can have a big effect during the rule-making process.

"When you get into talking about the nitty-gritty details or the fine language of bills, this is where the lobbyists earn their money," Litan says.

But he doesn't blame the banks for trying to defeat the Volcker rule. He says banks are inherently risk-taking institutions. For example, every loan they make is a risk.

"I think the idea that we can significantly constrain their risk by enacting some version of the Volcker rule is close to fantasy," Litan says

NPR forgot to remind its still-uninformed listeners that the long-dead Glass-Steagall legislation enacted in 1933 during the Great Depression had protected us from unreasonable dangerous risk-taking by disallowing gambling & fraud (securities underwriting, etc.) by the nation's banks. It protected us right up until it was repealed in 1999. See Glass-Steagall vs. the Volcker Rule—the latter is sometimes referred to as “Glass-Steagall in spirit.”

Chatter away!

Let's cut to the chase. Why can't Brad DeLong give an affirmative answer to his own insightful questions? Because if he does, then all would be lost. He would have to admit that without some good-sized bribes to put on the table, his advocacy is pointless. History tells us that leaders in a Waning Empire lose any meaningful, useful connection with the little people (the hoi polloi) they are supposed to govern, represent, take care of, etc. Corruption is rampant, and self-interest trumps all other concerns.

Mr DeLong: Come over to the Dark Side. Take the Red Pill. Read DOTE. Or just put on the sunglasses!

* If Brad answers NO to any of his questions, then he can't see the hand in front of his face.

Comments

[mcg1969]

Dave, you're a bit dark, but the signs point in that direction so keep at it. Here is a piece that you may enjoy commenting on at some point. What got me in this was how the US elites/businesses think it can bankroll the whole f***g world and make the common man suffer. Here is a quote from an Egyptian farmer in this piece: ' As prices rise and opportunities for work decline, each month is harder than the last. “They put us in the mill,” he said, “and they turn it, and turn it, and turn it.” '

http://web.archive.org/web/20021203073843/www.nyu.edu/gsas/program/neareast/911_resources/essay_mitchell.html

The author Timothy Mitchell has the most sensible talk (see London School of Economics site) I've ever heard on why peak oil is not discussed in mainstream as opposed climate change.

Peace