The Washington Post (a.k.a. Fox on 15th Street) Wants 15 Million People to Be Unemployed

The Washington Post, which gained worldwide fame for its effort to sell corporate lobbyists access to its reporters and Obama administration officials, wants 15 million workers in the United States to be unemployed. Of course that is not exactly what they said -- the Post argued against another stimulus package. But 15 plus million unemployed workers is the certain effect of the Post's preferred policy.

We will go through the Post's logic, but the simple fact that the Post opposes the policy should pretty well establish its usefulness. After all, the Post has a near perfect track record of being completely wrong on the economy at every turn.

Remember back in January of 2008 when the Post told readers that: "There is not yet any proof of a recession, .... Nor is there any consensus that a recession, if one comes, will be severe."

And then one week later we got the line: "timely, targeted and temporary." This is a paper that had no space for those warning of the dangers of the stock bubble in the 90s and the housing bubble in the current decade.

In short, given its near perfect track record of being 180 degrees wrong on the economy, the Post's opposition to more stimulus makes a compelling case for its merits. But, let's look at the argument.

The Post argues that most of the stimulus has not yet gone out the door, so we should wait to see its full effect. The point that we have not yet seen most of the spending misses the point that it is the rate of spending that matters, not the amount.

The stimulus is currently being spent out at a rate of close to $30 billion a month. This is pretty much its maximum speed. The fact that we will continue to spend out at this rate for the next year and a half doesn't mean that the impact will be greater in 6 months or 1 year.

Suppose that we would spend out at this rate for the next 10 years. By the Post's warped logic, we would want to wait 5 years or so to see the impact. Argghhhhhh, can't the Post find anyone who understands some basic economics?

The Post is also worried about the deficit, telling readers that there is a limited supply of capital in the world and that we are borrowing too much. Actually, for practical purposes there is not a limited supply of capital in the world when the United States and most of the other wealthy countries are seeing double-digit unemployment. We can pretty much spend whatever we want without coming up against resource constraints. (Unemployment means excess labor supply, get it?)

There is also a really great measure that economists use to determine the relative scarcity of capital. It's called "interest rates." At the moment, the interest rate on 10-year Treasury bonds is about 3.25 percent. That's more than 2 percentage points lower than during the days of budget surpluses at the start of the millennium. In other words, the evidence suggests that we have an enormous glut of capital right now, not a shortage.

It is truly a shame that the Post's editorial writers and so many other people responsible for this entirely preventable economic disaster still have their jobs at a time when millions of hard-working and competent people are unemployed. It will be a great day when this situation is reversed.

Comments

[steppenwolfsayshi]

What is the main difference between FDR's spending during the Great Depression and todays?
1. There was deflation! We have inflation.
2. He was on the gold standard. He didn't print money he didn't have to do it. He spent government reserves that he did actually have.

[Indra]

Most of the unemployed and soon to be unemployed where in bogus jobs to begin with. They were only available in an economy that was severely distorted. We are headed back for the real thing now and it should be interesting to see what happens to these people without jobs. Maybe they can train for real jobs with a real future like Green economy type jobs. Also I might add that most Americans are overweight or obese and that losing a job is a blessing in disguise as it will help them to lose weight from the worry and little food to eat. This will make them healthy and enable them to make better decisions. I think it was a big mistake to bail out the financial institutions and I think it is a mistake to coddle out of work people. A little stress is good for you as it gives you new insight and gumption to forge ahead with new and innovative ideas.

[steppenwolfsayshi]

There are so many reasons why the Post is not a real news source.
How can there be a scarcity of capital in the world when we can print it, or monetize debt, if you like. A glut of capital on the other hand IS dangerous! The only country that has sucessfully managed to print and print money and get people to buy their treasuries is Japan, which by the way still hasn't recovered from their 20 year long depression.
Inflation=amount of money x the speed the money is moving the economy (GDP growth)
**If you print too much money, you will have awful inflation once GDP growth picks up.
And how do we know that we have too much money? Banks aren't lending, so all the money is sitting in the bank, literal real paper money, building up. It's a ticking time bomb.

[blindhog]

I am brought to tears as I write this.

Yesterday I read an article in AARP in which groups have been stealing homes by forgery and then selling those houses to unsuspecting victims.

It's seems so bad now that I wonder if the number of bad guys outnumber the number of good guys.

From most reports Congress is bought and paid for, the poor are still put on the front lines whether in war or the economy and those who faithfully worked and saved have had their life savings swindelled from them. The rich are becoming more rich and the poor are becoming more, and they are becoming more poor.

What is the ending of this tragic movie?

[Samalabear]

Actually, the current stimulus has yet to send out all the money, it was not targeted or bold enough, there was too much pork in it, too much for tax cuts that do nothing to help people that no longer have job, and do the states have an oversight committee so that taxpayers know that the money is being spent for jobs? I don't know what New York will do with the money ultimately, but I heard a report via News 12 on Long Island this morning that we do indeed have shovel ready projects -- meaning could start tomorrow.

[cmaurand]

Its not like the current stimulus has created 15 million jobs or saved too many homes or done anything that has had any kind of effect other than pouring billions into Wall Street Pockets continuing trickle down which we all know does not work. Better to put the money in at the bottom and let bubble up.

[Christian]

Good one! There are a lot of people who need to be taken to the wood shed.

[William1950]

scarcity of capital? .. glut of capital... these words mean nothing... when billions can be stolen, and then created out of thin air... when debt... debt... as is something owed, to be eventually repaid... when debt can be the biggest export, and can be traded and retraded and those trading can be insured .. and then the insurance sold and traded... when bonuses are paid for the biggest debt creators..
what does the word "capital" mean anyway????
it seems as if one could spit into the wind and call it capital..
there is no end to this until a comet hits the earth, or something like that...

[Indra]

Yeah it's about time for the Comet!

[CharlesMac]

If you read Galbraith, Keynes, and Friedman, you will find that The Great Depression has very different interpretations, causes, and effects, pertaining to the same events. Here is one such event and one interpretation.

In 1936, there was a consensus among those in power that the recovery was well under way. One thing that few add in their analysis, is that US was a creditor nation, not a debtor nation (like us), when the Depression began. So it was understandable that certain political and populace powers had no appetite for government spending. With an upcoming election, these forces acted upon FDR and Congress to end the Works Projects and balance the Budget. And they acceded.

Within the next 9 months of 1937, markets and the economy collapsed. That mistake would seal the fate of the nation for a decade. Furious spending could not right it. Only habits of intense frugality and saving during WWII, which continued after the War, would set the stage for a strong Middle Class, and the New America of the '50s.

Like the WashPo narrative, everything is falling into place to repeat 1937.

If we wait and watch, and history repeats itself, it will be too late.

[vagabondvet]

Exactly. Investment levels didn't return to 1929 levels until 1941.

[DuganS1]

In 1936 the US govt gave out a huge amount of soldiers bonus payments, essentially $650 billion in todays dollars worth of stimulus checks. All that money was spent by early 1937. The often cited "cuts in govt spending" in 1937, was nothing more than not giving out additional stimulus checks in the following year, then the following year, then again, and again. The fact is that when the govt hands out cash and consumers spend it and GDP goes up, then that is not healthy long term GDP growth. Healthy GDP growth comes from investment. 1936 was actually a year of substantially increased inflation, not healthy either. Retail sales were good though.. LOL... The other big reason the economy tanked in 1937 was the new taxes, particularly the undistributed profits tax, which depleted the coffers of many a company, as well as the brand new 4% social security tax. It was also a year of a massive increase in strike activity that occurred after the Wagner Act was signed which brought mass unionization to the economy. Of course, with the new taxes and with millions of workers striking and forcing companies to increase wages, companies stopped investing. And with the strikes, GDP tanked because you can't produce anything when all your workers are outside the facility holding signs.

[DuganS1]

Of the $787m stimulus, about $100 million was just an extension of the AMT patch, so that was no stimulus. About a third of the stimulus went out in rebate checks and the payroll tax cut, but people have saved the money rather than spending it (no stimulus). A good chunk of the rest went to state governments, but they have just used it to fill their budget gaps, substituting federal govt money for their own to keep their operations and projects going (not a substitute, their state govt operations are not wealth creating and often wealth depleting). The rest of the money will get out slowly over a period of three years in the form of govt projects, so they are ineffective. In all, I just don't know what Dean Baker thinks the govt should do...?? More stimulus checks will still be saved, and for some it will just mean paying interest on credit cards or even staving off bankruptcy. More money allocated to govt spending will be wasteful and put upward pressure on interest rates, which will hurt the housing market , the auto industry, and private investment - it will also put pressure on the equity market. In my opinion, we need to do something to stimulate the manufacturing sector first, and the construction sector second. Massive worthwhile infrastructures would be good, or even increased defense spending on items like fighter jets, personnel carriers, ships,etc. Fixing an over-spending problem with more spending isn't going to work.

[Hailmaryyy]

The Washington Post is wrong and right. We do need more stimulus and in no way should we wait to take more action to help the unemployed.

However, the Post is right in that there is a limited supply of capital in the world right now. However, U.S. Treasuries are the safety option of choice and there will not be a limit on what the U.S. federal government can borrow.

What we need is more quantitative easing. The Federal Reserve needs to print money and buy most of the outstanding Treasury bonds in existence. This will open up capital for other parts of the bond market that are starved for it.

http://www.escapethenewgreatdepression.com

[vooter]

"and there will not be a limit on what the U.S. federal government can borrow"

LOL! Says who?

[vagabondvet]

Every time quantitative easing has been tried in history, it has destroyed monetary systems.

[alreadybad]

Will someone please tell me what happens to people now after unemployment runs out? If no children are involved, is it true that there is NO place to turn?

[vooter]

You got it--no place to turn. You gotta just pull yourself up by the ol' bootstraps and demonstrate some of that good ol' American pioneerin' spirit! LOL!

[William1950]

and you drop off the unemployed lists... they con't count the people who no longer recieve benefits even though they have failed to regain employment...

[DuganS1]

Collecting unemployment benefits or not is not taking into account in determining the unemployment rate. It only matters if you don't have a job and have looked for one in the previous 30 days.

[Sundialsvc4]

The "stimulus money" was given to thieves... who promptly stole it all. Why should we be surprised at this?

Crime, and high crime, are amazing things to watch: they plunge to the level of absurdity and keep right on going. Not only will one farmer eat his own seed-crop instead of saving it for next season, but also he'll steal the next guy's seed-crop and the next and the next. It does not "quit." They do not "learn."

Our economy, I believe, has NOT suddenly stumbled into its own "wretched excess." Rather, it is suffering massive blood-loss from rapacious parasites... parasites who understand above all else the importance of bribing Senators and Congressmen and the SEC, who are parasites themselves. None of them connect what is happening to what they have done. None of them can conceive of what this nation IS, and what might be.

The car-keys must be seized from these men's hands; their crime-mongering must be forcibly and decisively stopped. They will not "change their ways." They don't know how. They have been steeped in crime, and in its "pay," to fathom that it is an all-consuming cancer that is consuming them most of all.

[vooter]

Great post--thank you for having a brain....

[DallasMike]

Whats a shame is the politicians that were responsible for this are now the ones who say they are going to fix it.

[joecoolconservative]

I've got news for Mr. Baker. This country has approximately 153.9 million workers. If you take that total number and divide by 15 million you get approximately 10% unemployment. We are almost at 10% unemployment now. What's his beef?

[LeLoup]

Do you seriously think for a second that the unemployment rate is going to freeze at 10% right this minute and stay there?

It'll get worse before it gets better.

[tracerhaha1]

the unemployment rate only includes people who are looking for a job and I think people who are collecting unemployment.

[DuganS1]

The unemployment rate that is commonly sited by the media is called U-3, and it counts anyone without a job that has looked for a job in the past 30 days as unemployed. It doesn't matter if they are collecting unemployment insurance or not.