There has been a lot of really interesting reporting on the national debt and deficits recently. Most notably, some thinking folks have come out to say that the public’s and, by proxy, Washington’s obsession with the deficit is unwarranted and even insane. They are right.
The chart on the left, from Mark Gongloff, shows that the deficit is linked to the national unemployment rate. Now, Mr. Gongloff claims causality here through the ability or inability of government to collect revenues when people have or don’t have work. Certainly, this is partially true. Increasing employment would help in making sure that the bills are paid.
Interestingly, conservative America is interested in no such thing, choosing to support ridiculous austerity measures (budget and program cutting) despite evidence from Japan and, more recently Europe, that it doesn’t work in developed economies. Even the IMF, hardly a bastion of Keynsian economics, has come out and fully admitted the absurdity of cutting programs (and thus jobs) in the midst of an economic downturn.
We can disparage public employment as much as we like, but it seems intuitive that increasing any type of employment in an economic downturn is preferable to letting workers lay fallow, unable to participate in the economy.
The other side of Mr. Gongloff’s chart is that governments, faced with a revenue shortfall, are forced to bolster services that the private sector cannot (will not) provide to unemployed individuals. Simply put, people don’t stop getting hungry and sick once they lose their jobs. Governments, facing a choice of letting potential workers die or get healthy and return to work, would much rather choose the latter. Research has shown that losing one’s job significantly worsens health outcomes.
Of course, worrying about deficits is a much easier bone to pick than admitting that Washington is powerless to create private sector jobs in the short term. It’s no wonder that Washington would rather encourage such short sighted thinking.
1. Gerrymandering in Michigan: Can this state get more ridiculous? (Mark Maynard)
2. We’re way overdue for an increase in the minimum wage. I know a lot of small businesses that pay well above it, but the Wal-Marts of the world need a kick in the pants (NYT)
3. Krugman at an economics convention and the problem of consensus among economists (NYT)
4. Winning legislation for same sex marriage is largely a matter of how the issue is framed to voters. It’s a loser as a rights issue, but a winner as an issue of personal happiness and fulfillment. (NYT)
5. The IMF admits that austerity measures in the wake of a financial crash not only don’t work, but also make matters needlessly worse. Duh. (Bloomberg) and here’s the paper, which says, explicitly “We find that, in advanced economies, stronger planned fiscal
consolidation has been associated with lower growth than expected, with the relation being
particularly strong, both statistically and economically, early in the crisis.”
6. Shinzo Abe’s plan to get Japan on track again. He shoots for 2% inflation, but Japan’s inflation rate was -0.3% in 2011 and 0% in 2012. (Bloomberg)
7. Shinzo Abe gives up on watering down Japan’s official statements of apology to China and Korea for WWII, vowing to “consult historians,” whatever that means. I’m confident that the LDP will cherry pick “historians” friendly to their right wing cause. (Japan Times)
8. Fuel shortages in Malawi were the last President’s undoing. He has sice died, the new President has barely had time to get her feet wet, and the shortages begin again. (Baobob)
9. 12 things which will be more expensive in 2013. Amazingly, they are the 12 things that got more expensive in 2012. (Fiscal Times)
10. The National Debt: The End of the World is not Near. (Fiscal Times)