Remember when high unemployment was “structural”?
 | | A worker assembles cabinet doors at Riverside RV, builders of recreational vehicles, in Indiana in January.Brendan Smialowski/Agence France-Presse — Getty Images |
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Today’s column is about zombie ideas, a term I didn’t invent but did, I think, do more than anyone else to popularize. As I explain, a zombie idea is one that should have been killed by evidence but just keeps shambling along, eating people’s brains; the two biggest zombies in U.S. politics are belief in the magical power of tax cuts and climate change denial. |
I’m pretty sure, however, that I did invent the term “cockroach ideas,” which are false ideas that you do manage to get rid of for a while, but keep coming back. And it occurred to me that the current state of the U.S. economy offers an occasion to think about cockroaches past. |
We are, of course, experiencing low unemployment. There’s no mystery about how we got here: Trump has engaged in deficit spending on an unprecedented scale for an economy with low unemployment. The 2019 deficit was about $300 billion more than the Congressional Budget Office projected in the summer of 2017, before the Trump tax cut. That’s a lot of fiscal stimulus, even if it was badly designed. In fact, it’s close to the increase in the deficit created by the Obama stimulus at its peak in 2010. |
The real surprise is how hot we seem to be able to run the economy without inflationary pressures. Even I would have expected to see some acceleration of inflation at 3.5 percent unemployment. But the people who should really be surprised, and asking themselves how they got it so wrong, are the many, many Very Serious People who insisted, after the financial crisis, that high unemployment was “structural.” |
That is, they rejected the notion that millions of Americans were jobless because of inadequate demand, a problem that could be solved by pumping up spending, say by investing in infrastructure. Instead, they declared that technology was eliminating jobs, and/or that Americans lacked the skills to be productive in the modern economy, and/or that Obamacare was destroying the incentives to work and discouraging the private sector from hiring. |
You aren’t hearing those arguments much these days, although Andrew Yang has somehow built a campaign around the theme that runaway productivity growth is destroying jobs even as actual productivity growth is the lowest it has been in generations. |
Why were claims of massive structural unemployment so popular six or seven years ago? Part of the answer, I suspect, is that these were also the years when conventional wisdom decided that the budget deficit, not mass unemployment, was our biggest problem — and it was inconvenient to accept the idea that fiscal austerity would keep unemployment high. So claiming that unemployment was structural was a way to avoid facing up to the costs of the deficit obsession. |
Beyond that, however, some people have always found the notion that unemployment is basically a demand problem, easily solved by increasing government spending and printing more money, disturbing. It feels to them that big problems must have big causes, and can’t have easy solutions. |
So every time we go through a period of high unemployment, claims that it’s structural pop up and get taken very seriously. It happened during the 1930s, when many people derided the idea that just spending more could restore full employment. Then, of course, came a major fiscal stimulus program, otherwise known as World War II, and suddenly all those unqualified Americans were fully and productively employed. |
Anyway, the important point is that high unemployment was never structural, and the fact that we allowed it to persist for so long was a great tragedy — one for which the peddlers of cockroach ideas bear some responsibility. |
About that other zombie: Climate models have been accurate in tracking global warming so far; now they’re getting scary. |
Andrew Yang has nothing on Kurt Vonnegut, whose novel “Player Piano” depicted a society in which automation has destroyed work — right in the middle of the great postwar boom, a generation during which real wages and median family income doubled. Great novelist, bad economist. |
Just to be clear: technology can destroy some jobs, and deal body blows to regional economies. A fascinating podcast on the rise and fall of Glasgow shipbuilding. |
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