Financial Crisis Recap And Anti-Unemployment Policies

* The Swedish government effort to help a local company save Saab when it faced shut down after it was spun off by General Motors failed.

* The biggest mistake of the financial crisis, in cost to the taxpayer that the taxpayer isn't benefitting from is the bailout of Fannie Mae and Freddie Mac. There was no legal obligation of the U.S. government to do it. It did let the shareholders of that privately owned, but government chartered firm lose most of their investments, but it could easily have put the two firms into Chapter 11 bankruptcies or the equivalent, let bondholders rather than taxpayers take the $160 billion +/- haircut that exceeds the cost of all the other bailouts and some of the most notable stimulus programs combined, moral hazards would have been reduced, and the bondholders of Fannie Mae and Freddie Mac would have still gotten a decent share of their investment back, maybe not 100% with interest, but a pretty large percentage. Instead, in part, because of the bailout, we have some of the lowest mortgage interest rates in memory but far fewer borrowers that lenders trust to actually extend credit to in the first place. If those two institutions had busted, we might have 6% mortgage interest rates rather than 4% mortgage interest rates, but banks might be more willing to lend at that rate and either way there would be record low single family residential housing investment.

* Other programs that have done very little good have been the mortgage modification programs, the cars for clunkers program, and the homebuyer's tax credit. The way to have done mortgage modifcation would have been to allow cramdowns in bankruptcy for residences, that would have forced banks doing business in the shadow of that reality to compromise because it was in their interest to do so. The other two programs merely shifted the timing of major purchases by people who were already going to make them by a few months and were almomst completely counterbalanced macroeconomically by post-program slumps.

* There were good responses too. The government backing of privately insured money market funds when a single instance of one "breaking the buck" threatened a run on that entire shadow credit industry worked just like a scene out of "it's a wonderful life." The FDIC has performed brilliantly throughout. Extending unemployment benefits and allowing laid off employee paperwork free COBRA subsidies worked so well that we should consider making both programs into permanent automatic stabilizers and part of our social safety net.

* A monumental mistake has been the resort in the U.S. and abroad to government austerity programs that have laid off government employees at a time when we need economic stimulus, not what Krugman has called big and little Hoovers. The notion that government doesn't create jobs is nonsense. Somebody with a job is employed, someone without one is not, and dumping people into unemployment lines (that government is out of pocket for to some extent anyway) during periods of high unemployment and rising demand for government services is nonsense and defies lots of empirical economic evidence on the subject. The time to trim government payrolls is when private industry has better uses for those employees, not when it is suffering from a failure to see profitable things for people to do. We should be hiring teachers when people take advantage of a time when the private sector no longer wants their skills and they need to retool by going back to school, not firing them. Increased leniency on student loans, however, has been good policy. The more people go back to school, the fewer people there are in the workforce, and the lower unemployment will be as a result. And, when the economy comes back will have increased the capacity of our workforce.

* We should be creating more entry levels jobs in the Army, where there is a legitimate military reason to create them because the current force structure in two modest regional wars had the effect of putting rank and file soldiers have been put in rotations that are grossly too long and too frequent, not eliminating them to cut the defense budget - if we are going to cut the defense budget in a way that is sensitive to the health of the economy, we should be postpone big ticket purchases of weapons system that create few jobs per dollar spent and focusing on hiring soldiers and civilian support personnel which is a much better value in jobs per dollars spent. And, honestly, we can afford to postpone big ticket purchases on weapons systems because there is no looming conflict that requires them against a plausible opponent in the relevant time frame.

* We should stop trying to backfill active duty military force shortages with reservists and national guardsmen who have jobs, and instead establish a policy of meeting the entire active duty military force with active duties soldiers and sailors.

* We should prefer postage increases and generous pension overpayment settlements with the USPS to postal service layoffs and service reductions. Get it over with and give us the 50 cent first class stamp already. Subsidize universal service for the time being at least and think about cutting that subsidy when jobs are abundant, not when they are scarce.

* If the financial sector is recovering and the employment sector is not, it makes no sense to push for tax incentives that favor investment income over earned income. At times of high unemployment, we want incentives to employ, not incentives to automate.

* There are other no brainer ways to reduce the work force and free up jobs. For example:
- Use grants to replace the funds students get from work study, so that people who aren't almost out of the workforce anyway don't have to take those scarce entry level jobs.
- Increase the mandatory school attendance age for teenagers, which reduces no high school dropout entrants to the labor force and creates jobs for truant officers.
- Tighten overtime enforcement and overtime laws that employers don't give in to the temptation to simply overwork the hourly employees they have (potential hourly employees are far more likely to be unemployed than salaried ones), and instead hire new workers to do the work they need to get done.
- Subsidize unemployment programs that are seeing a surge in premiums in high turnover industries as claims rise so that businesses that would otherwise hire lots of people aren't discouraged from doing so.
- Temporarily waive penalties for early retirement under Social Security and public employee pension programs.
- Temporarily waive penalties for early retirement under tax favored defined contribution and defined benefit private retirement arrangements.
- Strengthen Family and Medical Leave Act enforcement that makes it possible to take unpaid leaves of absence.
- Slow down discretionary parole releases (which both supports prison employment and reduces the number of new entrants to the labor force).
- Shift jobs that are now part of programming for people who are in prison to people who are on parole or in halfway houses and would otherwise be part of the labor force.
- Allow longer time period installment payment plans and easier offer in compromise terms based on inability to pay for back tax debts for employers at risk of going out of business.
- Increase child tax credits while decreasing child care tax credits so that the tax incentive to work rather than staying at home with children is weakened.
- Relax expectations that beneficiaries of disability benefits like SSI and Social Security disability must meet in regard to trying to find employment. At times of high employment, we're better off if people who are willing to simply collect benefits without seeking employment do so.
- Put government program automation projects on hold. They cost a lot of money that creates few jobs, since tech employees are high wage, in areas where private industry is hiring because they have to cut their payrolls and put people out of work when their completed.
- Reduce the availability of temporary work visas for jobs that are unlikely to create secondary jobs like nannies and seasonal workers at ski resorts.
- Tighten enforcement of work prohibitions for people on student visas.
- Tighten limitations on double dipping in public employee retirement systems.
- Increase the taxation of Social Security benefits for people with earned income.
- Relax limitation on treating as dependents for tax purposes adult relatives who move in with family and aren't working or are only working part-time as dependents. Encourage family networks to buffer the intensity of the need to be in the workforce.
- Reduce employer tax risk related to tipped employees by treating tips as self-employment income rather than wages and salary. Tipped employees are among the easiest to create jobs for.
- Relax or clarify and publicize exceptions from minimum wage rules for commissioned employees and piece workers so employers can reduce the economic risk associated with hiring more people.

* To the extent possible, support a weak dollar in foreign currency markets, or at least, do nothing to try to strengthen the dollar. A weak dollar creates export jobs and reduces offshoring of employment via imports.

* Tighten legimate, non-tariff customs enforcement in any area that could undermine domestic employment, such as illegal imports of trademark violating knockoffs, and examination of health and safety issues for cheap imported products. This also creates customs enforcement jobs.

* Embrace growing industries like the medical marijuana industry, rather than cracking down on it.

* Develop policies that free up the mobility of people who are prevented from moving to available jobs by factors like upside down mortgages. For example, establish a right to short sell a residence without causing the loan to be called, or incurring any penalties, so long as the unpaid unsecured balance is paid.

* Use national law to discourage and weaken non-competition clauses in employment contracts that reduce the capacity of workers to go where the jobs are and have been convincingly been shown to reduce the aggregate economic health of the tech industry.

* Curtail limitations on performance rights for performable intellectual property like plays and songs. For example, strengthen the right to perform "covers" without IP owner consent by making the royalty inversely proportional to the age of the IP. Thus, the mandatory license fee for a twenty year old work would be half the mandatory license fee for a ten year old work. Buy back IP that is not currently generating significant revenues for its owners and orphan IP at discounted rates, since the transaction costs of dealing with these IP owners interferes with creative industry job creation. Create a new cottage industry by creating a right to translate old untranslated works and works that have been out of print for long periods of time at similar statutory royalty rates.

* Reduce filing fees and pre-filing procedural bars to bankruptcy (like credit counseling and the requirement the pleadings be completed pre-petition) that discourage hopelessly behind debtors from acting in an economically rational way and leave assets tied up in suboptimal uses. The increased viability of the bankruptcy threat also encourages banks to act reasonably outside of bankruptcy.

* Develop a right to provide add a reason like a loss of job or health crisis to a credit report so that future lenders can distinguish between spendthrifts and people who are merely unlucky.

* Allow charitable tax deductions for allowing a structure to be used as practice by fire departments thereby decreasing the supply of a glutted resource (buildings).

* Ease rules on tax loss carrybacks that would allow businesses that are struggling after having once been profitable to have a greater chance of surviving and preserving jobs in the process.