Jared Bernstein makes it simple
by David Atkins
Jared Bernstein points out the obvious in the New York Times. Discussing the alarming unemployment rate, he points out that automation and trade deficits are part of the problem, but the biggest challenge is income inequality:
Third, a growing number of economists believe that our very high levels of inequality are not just whacking the incomes of the “have-nots” but are slowing job growth as well. Part of this works through the demand channel: with so much spending power in the hands of so few, consumer demand is becoming bifurcated. Walmart will do well on one end, Neiman Marcus on the other, with too little in between. Another part works through misallocation: too much economic activity devoted to “innovative” finance and too little to sectors more germane to middle-class jobs and incomes.
The way to deal with it is by ending austerity and restarting a jobs program:
What would it take to reverse these trends? For one thing, in the near term, do no harm. Austerity, including sequestration, is the economic version of medieval leeching. The Federal Reserve continues to apply high doses of monetary stimulus, and that’s supporting low interest rates, which in turn are linked to the improving housing market. But it can’t do it alone, and Congress is counteracting such tailwinds with fiscal headwinds.
We also need a significant, permanent program to absorb excess labor (an explicit part of the Humphrey-Hawkins law). We should consider restarting and rescaling a subsidized jobs program from the 2009 Recovery Act that, though relatively small, made jobs possible for hundreds of thousands of workers.
And we have to reassess our manufacturing policy, including reducing the trade deficit. That means both reshaping our dollar policy — going after competitors who suppress their currencies’ value to get an edge on net exports — and public investments in areas where clean energy intersects with production.
This stuff is really simple. It’s not hard to understand. The Austerians have a reason not to understand it. They’re not interested in slashing deficits. They’re interested in killing the safety net and drowning government in a bathtub. Everything else is just window dressing.
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