Paul Krugman is worried about our future.
The Nobel Prize-winning economist told a meeting of other prominent economists that we're not doing enough in the short term to ensure that country's long-term economic health is taken care of.
"We are crippling our future as well as our present by failing to do what is needed to deal with the short run," the Nobel Prize-winning economist said at the American Economic Association's 2013 annual meeting on Sunday, according to a new transcript by Brad DeLong, an economics professor at the University of California at Berkeley. "A failure to deal with the short run is inflicting very large long-run costs."
Though Krugman did not give examples, there are several signs that the prolonged economic downturn is inflicting long-term damage on the economy. For one, the unemployment rate averaged 4.6 percent in 2007, but Federal Reserve Chairman Ben Bernanke said in December that the economy's long-run unemployment rate is now somewhere between 5 and 6 percent.
That's largely because the longer a jobless person is out of work, the harder it is for him or her to find a job. There are 12 million unemployed workers in the U.S., and they have been out of work for an average of 38 weeks, according to the Bureau of Labor Statistics. Companies are shunning many of the unemployed, so as a result, many jobless people are losing skills, connections and self-esteem.
Young people also are putting off major life decisions like marriage, having kids and buying a house because so many of them have become unemployed or financially insecure. This has major long-term repercussions for the economy. For example, there now will be fewer people to buy goods and services and make a productive contribution to society. The birth rate has plunged and is projected to hit a 25-year low this year. If it weren't for immigration, the U.S. population would be shrinking.