The average duration of unemployment this recession has been 31 weeks, and the percentage unemployed more than six months is far and away the highest since the Great Depression. Four percent of the labor force has been unemployed for more than six months. The previous post-Great Depression peak (2.5% of the labor force), was in the 1983-1984 recession.
The percentage of workers permanently laid off is also at a post-Great Depression peak.
This makes it unlikely that this recession will follow the pattern of some other post-Great Depression slumps where deep job losses were followed by rapid job recoveries. "Getting these people back to work will require something more than companies returning to their pre-recession profitability. It will require new companies, new industries, new areas to invest. [from the link above.]"
"It will require new companies, new industries, new areas to invest."
ReplyDeleteIndeed, that is why Obama's propping up old industries and old companies is not only prolonging the recession, it could well sink the U.S. as a first-world country.
It's not just the bailouts. Obama's continuation and expansion of Bush's wars is a subsidy to the defense industry, which is not sustainable.
The best thing that happened to the U.S. economy in my lifetime was when Clinton starved the military (expanding Bush I's "peace dividend" cutbacks in a big way), and all those displaced defense contractors contributed to the Internet economy. That was both a reduction in wasteful (unproductive and unsustainable) military spending and the development of a new industry.
The best thing the U.S. government could do for the economy would be to cut back military spending and reduce regulations for businesses. For large businesses, repeal Sarbanes-Oxley. For small businesses, eliminate income taxes. As you have pointed out in past blog posts, small businesses don't pay taxes anyway -- it's all just a huge waste of accounting effort. And although I dislike government intervention, it might be helpful in the short term if the U.S. government could provide some capital for small businesses that the big banks have withdrawn.
There is merit in the notion that propping up old industries slows down the economic engines that drive a recession, but also drive a recovery.
ReplyDeleteObama is, of course, winding down the Iraq War. In my view, the war in Afghanistan only one driver of current military spending, and not necessarily even the most important. It certainly isn't driving naval ship and submarine procurement, the F-22 or the F-35, none of which have an important role to play in Afghanistan. Decoupling general purpose defense spending from war spending, so that general purpose defense spending would no longer be politically untouchable, would be good policy in my view.
Sarbanes-Oxley's impact is much exaggerated. It is a nuisance to big business (and may provide some benefits), but isn't an important factor in profitability.
While it is true that privately held businesses generally don't pay corporate level income taxes, this is quite different from saying that income taxes are not incurred by small businesses. The self-employment income of small business owners is a big part of the tax base (despite the fact that it is the biggest part of the tax gap). Corporate income taxes are certainly not an important factor in small business competitiveness, and even those who favor abolition of corporate income taxes assume that income taxes on dividends, capital gains and executive compensation would remain in force.
Recital of my recommendations would take too much space for a mere commment.