Originally Posted by Gone4Good
For me to believe this, I'd have to believe that the demand of 14.8MM unemployed people isn't constrained by their unemployment.
And with respect to politicians (and the electorate) having their cake and eating it too, I completely agree. We shouldn't have squandered the nations balance sheet with guns and butter programs during the good times. But we did and that limits our ability to deal with the current economic situation.
Edit to Add: With respect to our fiscal constraints, there is a reasonable way through but it requires adult leadership. Regardless of today's large deficits (inflated by reduced tax revenue and higher 'safety-net' spending) our real structural budget problems are entirely about future entitlement growth, Social Security, Medicare and Medicaid. It's certainly possible to tackle the entitlement problem today (reduced future benefit promises and higher future taxes) in a way that solidifies confidence in our fiscal health, without negatively impacting today's economy. That would free up some capacity to deal with the current slump.
Don't hold your breath.
Just a couple of comments...
I do agree about the unemployement demand, but until there is something to move them to employed status, the demand curve is not going to move.. and I might suggest that the cost of getting them employed by doing some monetary policies etc. etc. can be quite high... now, this is from memory and is based back when Japan was blowing and going... but I remember reading that the 2.1 million car import limit meant that it cost something in the neighborhood of $250,000 per job saved in the auto industry... (and I think employment has gone down since then... just a guess)... SOOO, we spent a lot of money to keep auto workers employed and in the end their jobs went away anyhow...
As to the changes to future benefits.... as the discussion on the public pension thread shows, there will be a big fight with a lot of people who think that the status quo can continue.. and nothing will be done (which you said)..
To me, one of the things that they could do is NOT extend the Bush tax cuts... come up with some other tax cuts that would stimulate employement.. but also make sure they are cost effective... not $250,000 per job..
I have not looked, but what was the cost of jobs 'saved' on the last stimulus package