7/29/2019 2012-12-07 - The Forgotten Millions

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The forgotten millionsBy Paul KrugmanDecember 7, 2012 The New York Times

Lets get one thing straight: America is not

facing a fiscal crisis. It is, however, still verymuch experiencing a job crisis.

Its easy to get confused about the fiscal thing,since everyones talking about the fiscalcliff. Indeed, one recent poll suggests that alarge plurality of the public believes that thebudget deficit will go up if we go off that cliff.

In fact, of course, its just the opposite: Thedanger is that the deficit will come down toomuch, too fast. And the reasons that might

happen are purely political; we may be aboutto slash spending and raise taxes not becausemarkets demand it, but because Republicanshave been using blackmail as a bargainingstrategy, and the president seems ready to calltheir bluff.

Moreover, despite years of warnings from theusual suspects about the dangers of deficitsand debt, our government can borrow atincredibly low interest rates interest rateson inflation-protected U.S. bonds are actuallynegative, so investors are paying ourgovernment to make use of their money. Anddont tell me that markets may suddenly turnon us. Remember, the U.S. government cantrun out of cash (it prints the stuff), so theworst that could happen would be a fall in thedollar, which wouldnt be a terrible thing andmight actually help the economy.

Yet there is a whole industry built around thepromotion of deficit panic. Lavishly funded

corporate groups keep hyping the danger ofgovernment debt and the urgency of deficitreduction now now now except that thesesame groups are suddenly warning against toomuch deficit reduction. No wonder the publicis confused.

Meanwhile, there is almost no organizedpressure to deal with the terrible thing that is

actually happening right now namely, mass

unemployment. Yes, weve made progressover the past year. But long-termunemployment remains at levels not seensince the Great Depression: as of October, 4.9million Americans had been unemployed formore than six months, and 3.6 million hadbeen out of work for more than a year.

When you see numbers like those, bear inmind that were looking at millions of humantragedies: at individuals and families whoselives are falling apart because they cant findwork, at savings consumed, homes lost anddreams destroyed. And the longer this goeson, the bigger the tragedy.

There are also huge dollars-and-cents costs toour unmet jobs crisis. When willing workersendure forced idleness society as a wholesuffers from the waste of their efforts andtalents. The Congressional Budget Officeestimates that what we are actually producingfalls short of what we could and should be

producing by around 6 percent of G.D.P., or$900 billion a year.

Worse yet, there are good reasons to believethat high unemployment is undermining ourfuture growth as well, as the long-termunemployed come to be consideredunemployable, as investment falters in theface of inadequate sales.

So what can be done? The panic over thefiscal cliff has been revelatory. It shows that

even the deficit scolds are closet Keynesians.That is, they believe that right now spendingcuts and tax hikes would destroy jobs; itsimpossible to make that claim while denyingthat temporary spending increases and tax cutswould create jobs. Yes, our still-depressedeconomy needs more fiscal stimulus.

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And, to his credit, President Obama didinclude a modest amount of stimulus in hisinitial budget offer; the White House, at least,hasnt completely forgotten about theunemployed. Unfortunately, almost nobody

expects those stimulus plans to be included inwhatever deal is eventually reached.

So why arent we helping the unemployed?Its not because we cant afford it. Given thoseultralow borrowing costs, plus the damageunemployment is doing to our economy andhence to the tax base, you can make a prettygood case that spending more to create jobsnow would actually improve our long-runfiscal position.

Nor, I think, is it really ideology. EvenRepublicans, when opposing cuts in defensespending, immediately start talking about how

such cuts would destroy jobs and Im sorry,but weaponized Keynesianism, the assertionthat government spending creates jobs, butonly if it goes to the military, doesnt makesense.

No, in the end its hard to avoid concludingthat its about class. Influential people inWashington arent worried about losing theirjobs; by and large they dont even knowanyone whos unemployed. The plight of theunemployed simply doesnt loom large intheir minds and, of course, the unemployeddont hire lobbyists or make big campaigncontributions.

So the unemployment crisis goes on and on,even though we have both the knowledge andthe means to solve it. Its a vast tragedy and its also an outrage.