Loading document…
Opening in Pages for Mac...
Your browser isn’t fully supported.
For the best Pages for iCloud experience, use a supported browser.
Learn More
Cancel
Continue
T
Project Syndicate: What the
Democrats Must Do
J. Bradford DeLong
Department of Economics & Blum Center for Developing Economies at
U.C. Berkeley
, & WCEG
http://bradford-delong.com
::
brad.delong@gmail.com
:: @delong
Revised 2020-05-30
HASNEXTSTEPS:
1454 words
I. No Fundamental
Economic
Problem
here is no rational reason why the coronavirus depression
has
to
be both deep and long. We have immense social power in terms of
our technological and organizational competence and immense
reserves of skill and energy in our workforce. We are poor or as a result of
coronavirus: a lot of valuable activities that involve sustained close human
contact, especially in places at all reminiscent of the batcaves in which the
‘rona evolved, now have costs greater than benefi ts. That means that many
of us need to fi nd different productive things to do, many of us temporarily
and some of us permanently, and those different things will be somewhat
less valuable to us than the sustained-close-human-contact jobs used to be.
But all of that does not provide a single rational reason why it should take,
say, a decade before the share of Americans with jobs gets back to its
pre-‘rona sustainable full employment level.
II. But We Failed After 2008
A. No Rational Reason for Slow Post-2009 Recovery
The problem is that there was no rational reason, a decade ago, why it
should have taken a decade after the subprime fi nancial crisis before the
share of Americans with jobs ggotets back to its sustainable full
employment level. Yet it did. The housing construction sector had already
shrunk back to its normal size before the subprime crisis hit. There was no
sectoral structural adjustment required. There was on need to grope for
what previously unproduced commodities it was now to society’s benefi t
to make. The crisis itself did not make our workers less skilled or our
technology less effective and powerful. In the short run, the subprime
fi nancial crisis destroyed a great deal of the network of social trust that
supports our extremely powerful and fi ne societal division of labor. But in
the long run the only durable effect of the crisis was to destroy investor
confi dence that private-sector fi nancial institutions could create truly-safe
properly AAA-rated fi nancial assets.
And yet it took a decade after the subprime crisis before the share of
Americans with jobs gets back to its pre-‘rona sustainable full
employment level.
B. The Safe Asset Shortage & the Policy Failure
Why? Because the world was short of safe assets in the aftermath of the
destruction of the confi dence that private-sector fi nancial institutions could
create such. And governments failed to properly step in, either to create
institutions to mobilize extra private-sector societal risk-bearing capacity
to reduce the demand for safe assets, to create public safe assets in
suffi cient quantity themselves, or to stand up and print money and buy
stuff and employ workers themselves to rapidly return the North Atlantic
economy to sustainable full employment.
2
There is not a single rational reason why it should take, say, a decade
before the share of Americans with jobs gets back to its pre-‘rona
sustainable full employment level. But right now the odds are that it will.
For the same forces in the factors that led the great and good of the north
Atlantic to declare victory over the economic emergency of
unemployment in 2010 and turn it toward “austerity“ are at work today.
These forces and factors can be beaten: but they could have been beaten
over 2010 to 2014, and they were not.
C. The First Time as Tragedy; the Second Time Too
Over the next month
s
the United States will in all probability do nothing
on the policy level— nothing either to prevent the coronavirus depression
from being deep and long nor to keep America’s public health response to
coronavirus from being among the worst if not the worst in the global
north.
America’s Republican Party has no valid ideas for how to create a V-
shaped path for the economy. More text cuts for the rich would do exactly
as much to boost demand and employment as the McConnell-Ryan-Trump
TCJA did to boost demand and employment 2.5 years ago: zero. Cutting
social insurance benefi ts relative to what they ought to be Will make more
workers desperate to fi nd jobs, but if the spending is not there workers’
desperation to fi nd jobs has no more effect than does commuters’
desperate wish to go faster in a bumper to bumper traffi c jam.
Nobody in the Trump White House with enough authority to make policy
has any idea how to fi gure out what good policy might be, or even how to
implement a good policy if they by accident uncovered one.
3
III. January 2021 as Our First Possible Window
W
ith strongly partisan Republicans in charge of three of the four federal
veto point
s
—Presidency, Senate, and Supreme Court—in the U.S.’s
antiquated orrery of a system
,
the Democratic Party can do nothing
effective until January, and can operate then only if Republican voter
suppression efforts are unsuccessful and if the voters trust the Democrats
enough.
So what should the Democratic Party do, should there be a chance in
January 2021 to rescue America from another lost decade like the one that
followed 2007?
IV. Full Employment the Key Link
A. “What We Can
Do
, We Can
Afford
”
I believe that they should grasp onto one principle, and hold on to it for
dear life. Every American who wants a job and is willing to work should
be easily able to fi nd one. It may not be a great job. But it will be a job.
And it should keep their family above the poverty line. Every policy
should be judged fi rst by: is it part of that commitment?
Some will say that such a full-employment commitment—a commitment
that Harry S Truman and his wing of the Democratic Party wanted to
make back in 1946, when they proposed the “
Full
Employment Act”—is
not something that we can afford. Here I remember what John Maynard
Keynes said on the radio in 1942: “What we can
do
, we can
afford
”. The
fi nancial and payments structure exists to support our activities. It is not an
independent binding constraint on them.
4
And surely fi nding useful jobs for people willing to work is not something
we cannot do?
B. Finance & Economics Not Constraint But Support
Now arranging the payments and fi nance structure to support full
employment will have consequences. It may well not be possible for the
rich to see their wealth compound without doing their job as substantial
risk-bearers. Keynes certainly thought that was the case—that successful
attaining full employment meant
the euthanization of the rentier
, and that
the rich who wished to live in high style would be able to do so only by
drawing down their capital, or making massive bets on risky enterprise. If
so, so be it. Full employment may well turn out to require higher and more
progressive taxes as part of its fi nancing. So be it. Full employment may
turn out to require levels of national debt the curl the hair of those who
live through the 1970s. So be it: if sky-high debt is required for full
employment, it is not dangerous; and if it were to be dangerous it would
be because the economy will have shifted out of its current secular
stagnation into a confi guration in which sky-high debt is not necessary.
Full employment may require that we divert demand from elite
consumption to labor-intensive sectors like public health. So be it. Full
employment may require a large-scale labor-intensive public-works
program. So be it.
C. There Will Be Resistance
Thus there will be resistance. Those who dislike government jobs
programs, those who dislike higher government spending on public goods,
those who object to higher taxes on the grounds of “starve the beast”,
those who object to high debt, those who want to profi t without accepting
risk or undertaking enterprise—they will all wish to make the pie smaller
so that they can make their shares larger.
5
h
D. This Resistance Needs to Be Overcome
But this resistance is not in the national interest.
Prioritize full employment. And then all other policies will fall into their
natural places around it.
Notes, etc.
tml fi le:
<
https://www.bradford-delong.com/2020/06/what-the-democrats-must-do-project-
syndicate.html
>
edit html:
<
https://www.typepad.com/site/blogs/6a00e551f08003883400e551f080068834/
post/6a00e551f0800388340263ec1f49f9200c/edit
>
pdf:
<
https://github.com/braddelong/public-fi les/blob/master/ps-what-democrats-must-do.pdf
>
edit pages:
<
https://www.icloud.com/pages/0fy-YHTnKbH6GxN31qw46o4Ag
>
slides < >
edit slides < >
HASNEXTSTEPS: slides, audio…
1454 words 2020-05-30
6
