Jul 22, 2010 7:10 PM GMT
xuaerb saidHonestly it says nothing about the rate of unemployment, just the duration of those unemployed.
xuaerb saidThe only other time it [unemployment] has been higher was at 25% in the depression. This is why you will hear economists talk about "post world war periods" because the mistakes made in the depression era were: no social security, no unemployment benefits, AND they decided to balance the budget and raise taxes (to tighten belts) when people had nothing.
tokugawa saidxuaerb saidThe only other time it [unemployment] has been higher was at 25% in the depression. This is why you will hear economists talk about "post world war periods" because the mistakes made in the depression era were: no social security, no unemployment benefits, AND they decided to balance the budget and raise taxes (to tighten belts) when people had nothing.
Social security was passed while FDR was president, DURING the Great Depression, in 1936. For this, and his policies which reduced the unemployment rate from 25% to about 15%, FDR was re-elected in 1936 by a landslide.
FDR engaged in deficit spending from 1933-1936. After his 1936 election, FDR shifted gears and tried to balance the federal budget. The results were a disaster. Unemployment, which had been steadily declining since 1933, went up from 15% to 18% in 1938; and budgets deficits did not disappear. Reduced tax revenue, because more people lost their jobs, may have actually caused the federal budget deficit to get bigger.
FDR's failure to end the Great Depression was his stimulus program was not big enough. When federal spending skyrocketed to pay for World War II, unemployment dropped to its lowest level ever recorded; in 1943, less than 1% of the U.S. labor force was unemployed.
The lesson for Obama is that attempts to reduce the deficit during a major economic downturn will likely INCREASE unemployment. The danger to the economy is not inflation, but DEFLATION.
The economy is currently in what Keynes called "the liquidity trap." The usual way to stimulate the economy, using MONETARY POLICY, will not work if the interest rate is close to zero, like it is now.
The private sector is not investing in new plant and equipment because of the large amount of unused capacity it already has. GM is not going to build a new auto assembly plant when it has dozens of shut down plants which could easily be restarted.
FDR's success was based on putting people to work: Hoover Dam. Tennessee Valley Authority. Civilian Conservation Corps.
When private industry is unable to provide jobs for close to 10% of the labor force, the government should step in with public works projects. Financially strapped states and cities, unlike the federal government, are constitutionally required to pass balanced budgets. Cities and states are in desperate need for federal funds SO THAT THEY DO NOT NEED TO FIRE ANY MORE CITY AND STATE GOVERNMENT WORKERS. Without the 2009 Obama stimulus package, the current unemployment would be higher, maybe 11% or 12%.
VP Biden has said that the Obama administration's policies have saved or created 3 million jobs.
RYAN_SC saidI can believe it. My full-time job is trying to find a full-time job