Deep Hole Economics

From Paul Krugman in the NY Times: Deep Hole Economics

If there’s one piece of economic wisdom I hope people will grasp this year, it’s this: Even though we may finally have stopped digging, we’re still near the bottom of a very deep hole.

Why do I need to point this out? Because I’ve noticed many people overreacting to recent good economic news. …

Jobs, not G.D.P. numbers, are what matter to American families. … Growth at a rate above 2.5 percent will bring unemployment down over time.

Suppose that the U.S. economy were to grow at 4 percent a year, starting now and continuing for the next several years. Most people would regard this as excellent performance, even as an economic boom; it’s certainly higher than almost all the forecasts I’ve seen.

Yet the math says that even with that kind of growth the unemployment rate would be close to 9 percent at the end of this year, and still above 8 percent at the end of 2012.

Deep hole for what was to have been "Spire," tallest building in U.S.

Even though optimism prevails about 2011 over 2010, growth will be sluggish relative to slack in the system — and the unemployment rate will stay elevated for another five-to-ten years.

There is definitely a danger of becoming too optimistic, as well. Even were U-2 unemployment to approach 8 percent within the next two years, this means that U-6 measure of unemployment (includes those underemployed [the architect working at McDonald’s], part-time but seeking full-time, and those who have given up for the moment) shall remain between 16 and 17 percent.

No matter the improved stock market performance, no matter the increased profitability of corporations which have sent jobs overseas and earned more revenue abroad than at home, no matter the unneeded tax breaks to the uber-wealthy,…  a real rate of unemployment in the mid-to-upper teens means little prosperity for the nation and its future. Something’s gotta give…


2 responses to “Deep Hole Economics

  • Philanthropist

    Your insistence that people in this country are going to think & behave intelligently is your and those of like mind with you biggest problem. You want people to look at facts about taxes and economic policy to see what has worked and what hasn’t. Why would you think they will start now when they haven’t in the past??? You people who are trying to save this country’s economy need to look at facts about what has and hasn’t worked in winning the hearts and minds of the U.S electorate. Intelligence and good sense fail every time. You need to appeal to the worst in people — fear, hate, greed, superstition, cant, etc — if you want to get people on your side.
    Stephanie Mcnealy

  • spfaust

    I don’t disagree with your assessment of the electorate, but my aim is not to “get people on my side.” My intention is to educate the American electorate and set an example of how to critically think. I also want to add in my own rhetorical flair and opinion. If I succeed in that effort, one may or may not still come to the same conclusion as I. Thinking properly and critically does not require coming to the same conclusions. I respect thoughtful analysis that comes to a different position than me; I would then simply disagree with them. As it is now, I’m usually just disgusted by the lack of intelligent thoughtfulness and critical analysis by the American electorate. The republican goal is to win by playing on the electorates’ ignorance. My goal is to have the electorate think for themselves and conclude that progressive policies are the proper tools to improve the Unites States.

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