On Jobs, Robert Rubin Points In The Wrong Direction Again
WASHINGTON -- On a morning when dire unemployment numbers underscored the desperate and urgent need to jump-start the job market, shameless financial arsonist Robert Rubin was hosting a massive exercise in distraction.
The job market is suffering from a terrible cyclical shortfall in aggregate demand brought upon by the financial crisis and the Great Recession, but Rubin wanted to talk about long-term structural issues affecting employment -- like the need to reduce the budget deficit, or change corporate tax rates. His is a Wall Street agenda, not a Main Street agenda.
The setting was a policy conference hosted by Rubin's pet think tank, the Hamilton Project, and its strange bedfellow, the liberal Center for American Progress.
As Clinton administration Treasury Secretary, Rubin presided over the nearly-fatal deregulation of the financial industry, then went on to make $126 million nearly driving Citigroup into bankruptcy, making him arguably one of the men most responsible for causing the financial crisis. But it was so lucrative for him that he can underwrite events like this one.
It is crucial to recognize the primacy of the cyclical nature of the current jobs crisis, otherwise you don't focus on the right solutions. Structural unemployment, which involves a mismatch between workers and available jobs, is not something you can fix in the short-term. Cyclical unemployment -- when there are just not enough jobs, period -- responds with alacrity to stimulus spending, if it's big enough.
Progressive economists were alarmed last week by a report that on the eve of the disastrous mid-term elections, President Obama held a meeting with his economic team to debate whether high unemployment was cyclical or structural.
An increasing freaked New York Times columnist Paul Krugman asked:
What I want to know is, who was arguing for structural? I find it hard to think of anyone I know in the administration's economic team who would make that case, who would deny that the bulk of the rise in unemployment since 2007 is cyclical. And as I and others have been trying to point out, none of the signatures of structural unemployment are visible: there are no large groups of workers with rising wages, there are no large parts of the labor force at full employment, there are no full-employment states aside from Nebraska and the Dakotas, inflation is falling, not rising.
More generally, I can't think of any Democratic-leaning economists who think the problem is largely structural.
Yet someone who has Obama's ear must think otherwise.
No wonder we're in such trouble. Obama must gravitate instinctively to people who give him bad economic advice, and who almost surely don't share the values he was elected to promote. That's what I'd call a structural problem.
Friday morning's event just might solve Krugman's mystery. While Rubin himself hasn't had any official role in the administration, and his past and future acolyte Peter Orszag has left the White House, Orszag's replacement also has close ties to Rubin, as do other members of the economic team.
But as I wrote in April, after a similar conference, the last thing Washington needs is another infusion of Rubinomics -- namely the combination of deregulatory zeal, deficit obsession, free tradeism and general coziness with fat-cat Wall Street bankers that Rubin epitomizes.
Rubin, like other speakers at Friday's event, offered lip service to "the immediate imperative" of addressing cyclical unemployment -- but there was always a "but". But at the same time, the nation needs to focus on competitiveness. But, at the same time, "there is an historic change, a historic transformation of the global economy underway."
The "number one" issue on Rubin's mind remains the need for a "sound long-term fiscal regime" - i.e. deficit reduction.
And "one more requisite," Rubin said, is "that our elected leaders work across party and ideological lines" and "be willing to make the politically tough decisions necessary if we are going to meet our challenges" -- i.e. deficit reduction.
Center for American Progress chief John Podesta joined in, despairing of the difficulty in getting the media and the public to focus on the long term."We want to make sure the discussion is not simply on the short-term cyclical issues," he said.
Economist and blogger Brad DeLong in August summarized the difference between structural and cyclical factors:
Let me be the first to say that structural unemployment is a true and severe danger. When people who in other circumstances could be happy, healthy, and productive members of the workforce lack the skills, confidence, social networks, and experience needed to find work worth paying for, we obviously have a problem. And if unemployment in Europe and North America stays elevated for two or three more years, it is highly likely that we will have to face it. For nothing converts cyclical unemployment into structural unemployment more certainly than prolonged unemployment.
But is that true today? Does it look right now as if the biggest problem facing the economies of Europe and North America is structural unemployment? It does not.
Let us remember what structural unemployment looks like. The economy is depressed and unemployment is high not because of slack aggregate demand generated by a collapse in spending, but instead because "structural" factors have produced a mismatch between the skills of the labor force and the distribution of demand. The structure of demand by consumers is different from the jobs that workers are capable of filling.
Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail, bookmark his page; subscribe to his RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get e-mail alerts when he writes.