Obama: WTF?

OK. I am sorry for the expletive. But really.

First we read Obama is wondering out aloud whether our high unemployment is structural and thus insoluble to ordinary policy making. Then we hear he is freezing Federal worker pay in order to cut into the deficit.

What next? Social Security privatization? The abandonment of unemployment assistance?

How much more to the right can he shift?

This is absurd. No wonder his support amongst Democrats is wilting. He is jumping ship faster than anyone I can remember.

First: discussions about structural unemployment are the preserve of those who see the economy exclusively through a supply side lens. It is they, not us, who think the economy has suddenly become hidebound and thus impervious to government nudging and intervention. The facts, of course, belie their position, but why let facts intrude into a well oiled ideological argument? The simple matter is that the evidence to support an argument that our unemployment problem is predominantly one of structural issues is non existent. There are none of the normal telltale signs: rapid wage increases in understaffed industries and no labor shortages in parts of the country where business cannot grow because it cannot hire fast enough. Put this another way: if any of you know of such problems, please write to the government and let them know. None of the usual reports have any such problems in them. The best way to describe structural unemployment is simply to say it is the level below which further growth in employment produces inflation.

Please, if you locate high inflation let me know also. Setting aside the volatile stuff like fuel and food, prices are still trending down. Not up. And before you argue that we should include those volatile prices, let me remind you that they were dropping like stones last year, so to be consistent you would have to have been screaming about deflation back then. We eliminate them for a reason: we want to track the long term trend, and get rid of seasonal ups and downs.

So, without shortages, wage increases, inflation, and any other sign, where is this structural problem?

Perhaps – just perhaps – it is in the inability of workers to move from one area of the country where there is no work, to another where there is work. This immobility could be due to home prices and the fact that a worker’s home is worth less than the mortgage. So the worker cannot afford to move, even if there is no local work. And yes there may be a skill mismatch between the workforce and the work available. But all the data on those problems indicates that they are but a small part of the larger issue.

No. Our unemployment problem is cyclical. It stems from a lack of demand and an unwillingness on the part of businesses to hire given their expectation of continued lack of demand.

That Obama is debating this issue tells me he continues to be clueless. It also tells me that his advisors are ideologically not sympathetic to the workers and middle class who put him in power. There are sensible and credible things we can do to reduce unemployment, but if the powers that be deem it an insoluble problem we will never get such policies aired. I despair sometimes for America and its apparent death wish.

Second: that pay freeze. Pure dross. Pure pandering to the Republicans. Pure rubbish. It has no worthwhile impact on the deficit. It makes the pay gap between government and private workers worse. It reduces government efficiency by demotivating workers. It is ridiculous, inhumane, and stupid.

I am ashamed that it is now come to pass that Obama has crumpled up before the onslaught of the right wingers. Once more he has let workers down monumentally.

One last thing: will he fight for an extension of unemployment benefits? They expire this week. Let’s watch to see where he lands on that one.

This is not pretty. Then again what more do we expect?

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