According to forecasts by the Federal Reserve, U.S. unemployment will stand at a horrendous 9.5% at the end of 2010. That’s just about where unemployment stands today at 9.7%.
So I certainly understand why U.S. Senators and Representatives will want to hear from Fed chairman Ben Bernanke on the issue when he testifies in front of the House and Senate today and tomorrow, February 24 and 25.
And I’m sure that some member of Congress will ask Bernanke what the Fed intends to do about unemployment.
I’m betting that Bernanke won’t blow his top at the question but I sure wish he would.
An honest response would run along the lines of “What are we going to do about unemployment? Hey, what are you going to do about unemployment? Do you think the bill that the Senate just passed, the one you’re all so busy praising as a rebirth of responsible bipartisanship, is anything other than a bad joke on the American people? $15 billion in a Social Security payroll tax holiday to companies that hire workers that have been jobless for at least 60 days? That’s your solution for a $14.3 trillion economy where the Great Recession put 8 million people out of work? I thought the House bill at $154 billion was too small. But $15 billion?”
Bernanke could say that and more. The $15 billion bill would give companies a $1,000 per worker bonus if a new hire stays for a year. But it would not extend the current subsidy COBRA health insurance subsidy for workers who have lost their health insurance when they lost their jobs. (That program is due to expire on February 28.) It would not extend unemployment benefits for millions of workers facing an end to their benefits because they’ve been unemployed for too long. And it would not give any aid to states that are about to layoff tens of thousands of workers because of state budget shortfalls. And it won’t provide a significant amount of money to infrastructure projects.
The estimates I’ve seen from economists say that, at best, the Senate bill might create 200,000 to 250,000 jobs.
Okay, if you think the Federal government shouldn’t be in the business of jobs creation or is supposed to stay on the sidelines in what amounts of an economic crisis for millions of unemployed and their families, just say so. And reap the reward from voters who agree with your position or take the heat. Fair enough.
But please don’t pretend you think government should be doing this job when you’re doing everything you can to make sure that the part of government you belong to is doing just about nothing. There’s enough blame to spread around both parties. After all if almost all Republicans voted against the $15 billion Senate bill, the larger House effort just squeaked through a chamber dominated by Democrats.
Jim,
What a great cross section of opinion you have sparked. It almost sounds like congress itself!
At the end of the day, we get the leadership we elect. The whole business of making money from investing is premised on others loosing money from investing.
We don’t have a functional government because those seeking competitive advantage keep mucking up the system. Yet, those are the companies we know are going to succeed and make our investments pay off.
It is a fine line that no country has figured out how to walk. As much empathy as we may have for those without, the fact remains that there will continue to be those with and those without unless we are serious about embracing an egalitarian redistribution of wealth.
There is way more pain in the future than any of us care to think about.
1. Governments, including central banks, have never gotten us out of economic downturns — including the Great Depression — instead, they have exacerbated them. This was Milton Friedman’s main point, and he was correct.
2. Good economists become politicians once they go to Washington — examples are Romer and Summers — and therefore I would not trust anyone in Washington, especially an economist, to fix the economy.
3. Don’t forget, you see the dollar the government spends — you don’t see where the dollar would have gone had it not been borrowed by the government or taxed.
well the longer they bicker back and fourth we mite be able to find out if the Ron Paul idea works
YX,
it says here http://www.csmonitor.com/USA/Society/2010/0223/Harry-Reid-links-unemployment-to-rise-in-domestic-abuse
that Reid is correct.
Jim,
Robert pretcher is calling for a grand supercycle top of the market now. Is it time to move into cash now?
“”Nobody should be taking risk right now. This is a time to be safe,” he says.”
http://www.businessinsider.com/henry-blodget-prechter-its-the-end-of-the-world-2010-2
Just look at Britain and Japan if you think the government can create jobs and fix the economy with their idiotic Keynesian policies. The economy can fix itself if the government would get out of the way.
The government/Fed causes the problems it doesn’t fix anything.
It all is (to them) smoke and mirrors & hocus pocus….at our expense. Jim said it, others have said it and I echo it: Repeat after me; government is a poor creator of jobs…leave that to the private sector! nuff said!
specialcraig,
The problems we have now are inherent in our economy and the institutions we have running it. There is no bandaid fix, but that is all that has been proposed since the beginning of the current recession.
Ed McGon,
That is true, but what is even scarier is I wouldn’t hire any of the corporate bankers to fix the economy either. Who can we turn to to fix it? I think we need to spend more time trying to prevent getting to this point, rather than just focusing on how to fix it ‘this’ time.
Jim had a post about this crisis may be able to change how things are run. It doesn’t look like much will change, but if the great recession wont change anything, what will?
gekay, why do you think Jim is a novice? Are stock picking and fiscal and monetary policy completely disconnected? Jim has written about fiscal and monetary policy on many occasions, and he makes great points. What exactly makes one an expert on fiscal and monetary policy? I’d argue the head of the fed doesn’t know much about fiscal or monetary policy, ie Alan Greenspan.
gekay:
This country has already seen those who “really understand how the economy functions.” They are only good at destroying the economy.
Volumes were written on what happened in the Great Depression and how America dug itself out of that mess.
You should resist commenting about these topics until you read and understand one of these works. How about starting with the presidencies of Hoover and Roosevelt and continuing with the economic policies of Keynes…?
Simple question: Would you hire a politician to fix your car? If you say, of course not, but a car is different than an economy, I’d agree with you, except that an economy is far more complex than a car. Yet we expect they can fix an economy? But as we’ve seen, they are darned good at breaking the economy…
Anyone who thinks the government can create net new jobs by spending doesn’t really understand how the economy functions. The government should help the unemployed be able to feed their families until the economy rebounds on its own — thats the best and only thing the government should do in a downturn. Jim does a great job at stock – picking; he should resist commenting on fiscal & monetary policy at which he is a novice.
Jim, excellent and insightful(about your beliefs) column. It would be interesting one day if you wrote a fantasy tale–kinda of like Charlie Munger’s–that would be a way of telling us how we might get out from under this garbage heap. Maybe the column could be about a place called Fixitland;-)
we have had 30 years of a economy unequalled by anything in world history. where the common man who would be wealthy in any other place in the world has not only spent everything he has earned but plunked a credit card down for what he has not earned. If the masses are never held responsible for a lifetime of choices we can kiss what little freedom we have goodbye. A few people have been unlucky but most have had eyes bigger than their wallets for a long time. This is not an excuse for coorporate welfare either.
gs,
$60,000/job is still good. How about this?
“How could a $787 billion stimulus package only produce about 650,000 jobs, even if only half has been spent so far? At that rate the program is costing about $600,000 per job. That amount should be producing more like 10 jobs, not one job. ”
http://www.huffingtonpost.com/les-leopold/stimulus-versus-debt-redu_b_373673.html
Excellent post Jim!
I thought the same thing when I read about this bill. Complete waste and shows there is no leadership in Congress (either party) or the President.
What do we need? A second party… because the Demopublicans are basically the same.
15 billion for 250,000 jobs, thats $60,000 spent per job. Why doen’t the government hire the unemployed directly for $30,000 and create 500,000 jobs. Sure beats the $7.50 an hour I made on unemployment and with government services being cut we could sure use the extra people.
If I correctly remember my high school government class, it is congress, NOT the Fed or the President that is tasked with making laws and spending money. THEY have the power to deal with unemployement, NOT the President or the Fed. And yet, most will get re-elected and continue on, while the blame gets placed where it does not really lie….
Jim I totally agree with you on this….hopefully the mid-term election can change something even not a lot…
Jim,
I love these posts when you express what so many people want to say!
Mturpin hit things right on the head. There are very few people in politics that can/able to do what is best for the people……. We have a great saying that anyone who wants to be a politician shouldn’t be!
Democrats? Who care about Democrats? There are only 2 Demacratic lawmakers in Washington. The rest are watered-down or Republicans. And this includes the Prez himself.
You can have them… You can have them all!…
Please watch this:
Will any business (particularly small business) start hiring just because of this meager $1K tax break while mountains of government mandates waiting for them?
Will anyone change his/her mind on this administration’s anti-business stunt just because THE ONE has dined with a few corporate huncho?
k. l. Dave:
“Care for the common men”? Did you read Democrat’s senate majority leader Harry Reid was reportedly making fun of unemployed men?
Have anyone checked how Peloci and Feinstein’s husbands’ businesses have been “stimulated”.
kowloon, we are the rich and I agree.
Posting it again from Barry Ritzhold:
“Here is something to think about: Even after the TARP has been fully paid back, the US Government is STILL bailing out TBTF banks more than we are giving bailouts to US families with hungry kids, and more than all of our overseas aid . . . ”
http://www.ritholtz.com/blog/2010/02/how-much-are-we-subsizidizing-banks-beyond-tarp/
-bloodsuckingdogoodervampire
Don’t forget. Politics is about money and power. Sadly it has little to do with anything else.
Jim,
For me, this post hits the nail right on the head. It says so much about why our present Congress (both parties) is worthless. Lately, as I have read about or viewed events from the 1930s, it has struck me how government took aggressive action at that time to help the common working man in the US. Things like government works projects and foreclosure relief. Looking back on that era, those actions seem radical by today’s standards. That shows how we once had a government that cared about and acted for the common working man and the working class. But it is also a damning indictment about our present government of the rich, by the rich, and for the rich.
Another off topic
“Rogoff Says China Crisis May Trigger Regional Slump (Update1) ”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4MydrE5VOEM&pos=4
Off topic
Iron Ore Derivative Traders Bet on ‘Tipping Point’ (Update2)
http://www.bloomberg.com/apps/news?pid=20601109&sid=a_S3ROAJKYow&pos=14