Last week, I argued that the Federal Reserve doesn't seem to care much about high unemployment. Apparently, very few other people in Washington do, either. That's one way of interpreting the events of the last week. Congress is adjourning without extending unemployment benefits, in large measure due to repeated Republican filibusters. On Thursday, President Obama gave a major address about "¦ immigration reform. All this on the eve of a jobs report that showed the economy lost jobs in June, due largely to the loss of temporary census jobs.
The economy is now presenting a strange dichotomy. The corporate sector has returned to rude health, with improved balance sheets and tons of cash. It has helped lead the recovery. But without the mighty American consumer, who generates 70 percent of economic activity, participating to the fullest degree, the recovery will seem anemic. Without a healthy jobs market, the recession-shocked consumer won't spend.
And yet Washington's response seems to be a collective throwing-up of hands. There are a few things the government can do about persistent long-term unemployment. First, it can lessen the pain it causes by expanding the safety net, extending unemployment-insurance benefits so that the long-term unemployed have a source of cash to help them stay current on rent, mortgage, and credit card bills. Second, it can respond to persistent long-term unemployment by enacting policies aimed at creating and preserving jobs. These can take the form of summer jobs programs, enhanced public works programs, aid to strapped municipalities so they can avoid layoffs, and tax cuts and credits for investment and hiring.
But so far? Nothing. And the question is why.
First, there's the matter of the uncertain trumpet at the Fed. When I wrote last week that Federal Reserve Chairman Ben Bernanke didn't seem particularly bummed about high unemployment, a reader asked what I expected him to do. At the very least, he could have lent moral support to the need for further stimulus"”if only out of self-interest. Maybe he wants to be remembered as the Fed chairman who presided over an era of European-level unemployment when skills eroded and several graduating classes entered a glutted workforce.
But the two branches of government responsible for initiating and implementing fiscal policy haven't acted with a sense of urgency, either. And politics clearly has a lot to do with it. On the fringes of the Republican right, there's some flat-out Randian lunacy"”i.e., Nevada Senate candidate Sharron Angle arguing that laziness and a desire to live large off unemployment checks is responsible for her state's 14 percent unemployment rate. There's some parochialism. Sen. Ben Nelson, a Democrat from Nebraska, a state where the unemployment rate is about half the national average, joined the Republican filibuster of an extension of unemployment benefits"”his constituents don't need it. In the broad center, there's a lot of serious hypocritical deficit-hawk nonsense. Along with many other senators, Nelson opposed the recent benefit extension on the grounds that it was immoral and wrong to enact a $19 billion spending package without offsetting tax increases or spending cuts. Funny how such probity never surfaces when legislators vote to spend much larger sums on the wars in Iraq and Afghanistan, on the Medicare prescription drug benefit, and on the Bush tax cuts. Meanwhile, on his Web site, Nelson regularly touts deficit-fueled stimulus spending being funneled to Nebraska.
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