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Wednesday, April 24th, 2013

The Jobless Trap

Author:     PAUL KRUGMAN
Source:     The New York Times
Publication Date:     21-Apr-13
 Link: The Jobless Trap
Stephan:   I teach a workshop each year at the Omega Insitute in Rhinebeck, New York. This year it will be 30 June to 6 July. Fifteen people have written me this time to say they would like to come, had planned to come, but just didn't have the money to do it. Their husbands, or wives, or they, themselves, are out of work, and have been for months. One woman wrote and said, 'I am 59 years old, I have gone through my savings, and I wonder if I will ever work again.' Two weeks ago the Bureau of Labor Statistics released its latest report saying, 'Both the number of unemployed persons, at 11.7 million, and the unemployment rate, at 7.6 percent, were little changed in March.' If we put the money we put into war into making the transition from carbon to noncarbon energy this economy would bloom like the tulips in Ronlyn's garden. The middle class in America is dying because debt is more important than work.

F.D.R. told us that the only thing we had to fear was fear itself. But when future historians look back at our monstrously failed response to economic depression, they probably won’t blame fear, per se. Instead, they’ll castigate our leaders for fearing the wrong things.

For the overriding fear driving economic policy has been debt hysteria, fear that unless we slash spending we’ll turn into Greece any day now. After all, haven’t economists proved that economic growth collapses once public debt exceeds 90 percent of G.D.P.?

Well, the famous red line on debt, it turns out, was an artifact of dubious statistics, reinforced by bad arithmetic. And America isn’t and can’t be Greece, because countries that borrow in their own currencies operate under very different rules from those that rely on someone else’s money. After years of repeated warnings that fiscal crisis is just around the corner, the U.S. government can still borrow at incredibly low interest rates.

But while debt fears were and are misguided, there’s a real danger we’ve ignored: the corrosive effect, social and economic, of persistent high unemployment. And even as the case for debt hysteria is collapsing, our worst fears about the damage from long-term unemployment are […]

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