Tuesday, January 27, 2009

Stimulating Unemployment

Limited, Inc. has very lucid post on the crisis and current economic stimulus plans:

So the only argument about the stimulus is this: should the government absorb the extra unemployed or not? That is, should the government grow 3 or 4 percentage points?

The argument against this is not an efficiency argument. That is a stupid argument. The argument is, rather, that somehow, business can absorb the extra unemployed. Which means that the right is saying that, in the next year, the private sector can expand 4 or 5 percentage points to assume its usual standing in the economy.

Do you believe this? Does anybody? No tax break tax cut bullshit should take anybody’s eye off that ball. The question is: how can the private sphere possibly expand to absorb the 4 to 5 percent of the unemployed?

In reality, the right is saying, let the unemployed grow. And underneath that is the notion that if we can actually diminish the salary of the average worker, then businesses will be inclined to hire them.
Very clear. And exactly right.


  1. Maybe I'm missing something, but I don't see why the argument from the right has to be that the economy will grow 4-5%. The argument only has to be that it can absorb those workers. It can do that without growing if the aggregate price of labor for that level of employment comes down enough to 'fit' the current economy.

    Never waste a good crisis, as they say.

  2. OK, what I missed is that this was already the punchline. Oops. So then what I'm confused about is why this seems like a hidden agenda we must discover. It's MacroEcon 101. When profits fall, cut input costs.

    When I talk to people who think like this, they're honestly baffled that adults could find it anything but obvious. Not even worth saying, or concealing if you're saying it. Politicians along these lines know to be a little more cagey, but only because they've come to grips with the empirical fact of clueless liberal hordes.

  3. Thanks for this one. I do wonder to what extent the larger corporations are firing ("laying off") workers because they can and/or to what extent they really must lay them off, economically. I don't know about hidden agendas, but there are probably multiple agendas.