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Economics

Wat de Democraten moeten doen

Jun 2, 2020 J. Bradford DeLong

BERKELEY – Net als bijna alle andere landen zijn de Verenigde Staten sinds het begin van de COVID-19-pandemie armer geworden, omdat de Amerikanen niet langer waardevolle activiteiten kunnen ontplooien die nauw menselijk contact vergen. Miljoenen werknemers moeten nu andere productieve activiteiten zien te vinden, en veel van die nieuwe taken zullen niet zo waardevol zijn als de taken waar zij voor in de plaats komen.

Maar er is geen economische reden dat de depressie die door de COVID-19-crisis is veroorzaakt bijzonder lang of diep hoeft te zijn. De VS lopen voorop in de wereld als het op technologische en organisatorische vaardigheden aankomt, en beschikken over een zeer ervaren beroepsbevolking. Het probleem is dat het herstel niet vanzelf gaat.

Het feit dat het de VS tien jaar heeft gekost om volledig te herstellen van de financiële crisis van 2008 moet leidend zijn voor ons denken nu. Destijds was de Amerikaanse woningbouwsector al vóórdat de subprime-crisis uitbrak gekrompen naar zijn normale omvang, wat inhield dat er geen structurele aanpassingen in de sector nodig waren. De uitdaging was veeleer om middelen te identificeren en te sluizen naar voorheen niet geproduceerde goederen die in de toekomst waardevoller zouden worden.

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J. Bradford DeLong

Writing for PS since 2002
248 Commentaries

J. Bradford DeLong, Professor of Economics at the University of California, Berkeley, is a research associate at the National Bureau of Economic Research and the author of Slouching Towards Utopia: An Economic History of the Twentieth Century (Basic Books, 2022). He was Deputy Assistant US Treasury Secretary during the Clinton Administration, where he was heavily involved in budget and trade negotiations. His role in designing the bailout of Mexico during the 1994 peso crisis placed him at the forefront of Latin America’s transformation into a region of open economies, and cemented his stature as a leading voice in economic-policy debates.

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J. Bradford DeLong considers the rising costs to the US of President Donald Trump's lethal incompetence.
The Great American Tax Heist Turns One
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Economics 47

The Great American Tax Heist Turns One

J. Bradford DeLong explains why the economists who expected supply-side stimulus to boost investment have gone silent.

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j. von Hettlingen Jun 8, 2020

J. Bradford DeLong urges Democrats to revisit Harry Truman’s Employment Act of 1946, and enforce it if they retake the Senate and the White House in November. Although the bill was passed, the measure had “since been watered down,” because Republicans and conservative southern Democrats in Congress loathed many of the other proposed reforms. Today’s Republicans do not know how to achieve a “V-shaped recovery from the recession caused by Covid-19. While the rich benefit from Trump’s tax cuts, social programmes have been slashed. Democrats must seize the opportunity and start with a “commitment to full employment.”
In 1946, Truman called for new public works programmes; a legislation that guaranteed full employment and a higher minimum wage; an extension of the Fair Employment Practices Committee – (FEPC), a war-time agency that monitored discrimination against African Americans in hiring practices of government agencies and defence industries – a larger Social Security System, and a national health insurance system. The public was divided over the prospects of an enlarged social welfare state and continued government intervention in the economy. Democrats and key constituents of their Party supported them, but many other Americans did not.
Given the scale of high employment – some 20 million unemployed – today, the mood seems to change. The author has faith in the US with its “technological and organizational competence,” which is “home to a highly skilled workforce. The problem is that recovery won’t happen by itself.” So a government needs to spend big to save the economy, making full employment its “highest priority.” Hence Democrats “must commit unconditionally to the principle that every American who wants a job should be able to find one.” Even if the job is not “great, he/she must get paid a living wage “to keep the worker’s family above the poverty line.”
That it took “a decade” for US employment to recover from the 2008 subprime crisis, triggers the fear that it might take even longer for employment to return to its “pre-pandemic level. Ten years ago “the world was short of safe assets, and governments failed to address that problem in the right way. The US, for its part, should have done more to mobilize extra private-sector risk-bearing capacity, create safe public assets, and support workers, including by printing money and buying stuff to drive effective demand and employment growth.” This prompted fiscal conservatives to shift to “austerity” in 2010, and the “same forces” are once again seeking to do the same.
The author embraces Keynesian economics. He says, “finding useful jobs for willing jobseekers is surely something we are capable of doing. But adjusting the prevailing payments and financial structure to support full employment would of course have consequences.” As a result, “the rich would need to bear substantial risk in order to achieve sustained compound growth on their wealth. As Keynes argued, full employment would “lead to a much lower rate of interest,” which is seen as the “euthanasia of the rentier.” In order to “maintain their glitzy lifestyles, the rich would either have to draw down their capital or wager it on risky enterprises.”
Cutting corporate taxes in 2017 had not created more jobs. Instead it has enabled companies to buy back stock, not to invest in job creation. Stock buybacks enrich companies and their leaders, funneling the money to shareholders. Meanwhile, “supporting full employment also may turn out to require higher and more progressive taxes, and it may lead to public-debt levels that would seem unfathomable to those who lived through the 1970s…If sky-high debt is required to achieve full employment in the medium term, it is justified. The only way that it could become dangerous is if the economy were to shift out of its current secular stagnation, at which point sky-high debt would no longer be necessary.” The problem is that it is alwayss difficult to predict the trajectory of such a policy.
Indeed, Democrats will win more votes, if Biden campaigns on the platform of “restoring and maintaining full employment,” veering away from “elite consumption to labor-intensive sectors like public health,” and focusing on “a large-scale labor-intensive public-works program.” Although the Democrats-controlled House passed a $3 trillion relief package in May, Senate Republicans have put brakes on additional aid, unwilling to grapple with the economic fallout and mitigate ordinary Americans’ hardships. Inequality and healthcare are the pressing problems that preoccupy the public – a reality Republicans refuse to realise. Hopefully they will pay a high price for it in November.
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shayre Jun 5, 2020

Sukh's Thoughts: Poor white people have voted against their own economic self interest because they have been trained to believe that any program designed to uplift the poor will only help black people.

This belief, as painful as it is to accept, was pragmatic to sell to the masses. It took into account human nature, but more importantly, the benefits of hegemony, and being the printer of the world's reserve currency.

With the end of hegemony, this false belief will now be invalidated (and America is rich enough to make it so).

What needs to get done, gets done, regardless of which party is in power.
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Prashant Kotak Jun 3, 2020

"...the Republican Party has no valid ideas for how to achieve a “V-shaped” rexcovery..."

The Lord God Himself (or Herself as the case may be) could turn up tomorrow as the US President, and they wouldn't achieve a 'V' shaped recovery. A two decade global depression is baked in. There is nothing you can do.
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Prashant Kotak Jun 2, 2020

If you want to replace the Republicans, why on earth have you picked Biden? Or is that not a question one should ask?
- shayre Jun 5, 2020
  
  It doesn't matter who the Democrats picked. Trump will do whatever it takes to throw the election (he has no interest in being President for another four years).
  
  And a collapsing economy and stock market (by the time the election roles around), will guarantee a BlueWave in November and consent will have been manufactured for the needed progressive future, now that neoliberalism is no longer the pragmatic ideology to pursue (because China has sacrificed massively to end U.S. hegemony, especially economic hegemony as a result of being the printer of the world's reserve currency and the only super power up to now, since the collapse of the Soviet Union).
  - Prashant Kotak Jun 5, 2020
    
    I agree Trump will likely lose (not guaranteed though), although I don't think he wants to. The Presidency for Trump is a vanity project, so it would hurt his pride if he is rejected - rare for an incumbent not to get a second term. But Biden is pretty much a journeyman. Moreover, he is visibly ageing - not in full command of his faculties. It would mean the Vice President and the government machine become the de-facto President, while Biden occasionally is trotted out on to the balcony to grin and wave at the crowds. A recipe for a vicious behind-the-scene power struggle and dysfunctional government.
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Michael Public Jun 2, 2020

Like generals always fight the last war, economists always give advice for the previous depression.

Some economists estimate that there is only enough work for 40% of the World's population. AI, automation and plummeting energy costs will ensure that this figure trends significantly lower, especially with self driving cars, cashier-less stores and automated banks looming large now.

Rather, there should be a heavy investment in on-shoring production, automating it and making sure that the dividend of this automation goes to the public, not to the oligarchy.
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