 The view of Keynes that suddenly seem to like best. (UPI) By Steven Pearlstein It's curious to hear Republicans suddenly talking about the urgent need for fiscal stimulus. For the past eight years, including the darkest days of the Great Recession, they tried to convince us that fiscal stimulus doesn't work, and that the only way to really boost economic growth is to cut the budget deficit. But now that they are about to get their hands on the federal checkbook, Republicans have decided that we are all Keynesians once again. To anyone serious about economic analysis, it should be obvious that we don't need Keynesian stimulus at the moment. The unemployment rate is at 4.6 percent, which is about as close to full employment as it gets. The economy is producing more than 175,000 jobs each month, with many industries complaining they could add more if there were trained workers to hire. Wages are rising faster than they have in a decade, and faster than productivity is rising. Corporate profits and share prices are at record levels. And thanks to aggressive bond buying (and bond holding) by the Federal Reserve, monetary policy is still extraordinarily accommodative. Keynes himself would never have suggested that this is an appropriate time to use the government's taxing and spending powers to boost the economy. In fact, seeing the developing bubble in stock and real estate markets, Keynes probably would be recommending a budget surplus right about now. It is true that factory utilization is still a bit below its historical average, but you would expect that in a de-industrializing economy. And while parts of the country are still suffering from that deindustrialization, there is no evidence that a burst in government or private spending will, to any substantial degree, make its way to those communities, their unemployed and under-skilled workers or their uncompetitive companies. In the jargon of economics, their problems are structural, not cyclical. That's a harsh reality, but a reality nonetheless. At this point someone will surely point to the several million working-age males who have dropped out of the labor market and are now said to spend their days watching porn and playing video games. This has been a decades-long, secular decline that remains poorly understood. Some of the presumed causes are worrisome: low wages for unskilled workers, an increase in disability claims, more black market activities, an epidemic of drug addiction and the increase in incarceration rates. Other factors are more likely to be celebrated: more stay-at-home dads with wives who are working and earning higher pay, more people going back to college or earning advanced degrees, more Wall St. and tech millionaires retiring to the beach. None of these trends, however, is likely to abate with a sudden boost of fiscal stimulus. |
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