Economic policy reports, blog postings, and media stories of interest:
John Cassidy of The New Yorker blogs that “we are all still Keynesians.”
In the real world that rarely intrudes upon conservative economists and voters, both parties (and all Presidents) are Keynesians. Whenever the economy falters and private-sector spending declines, they use the tax-and-spending system to inject more demand into the economy. In 1981, Ronald Reagan did precisely this, slashing taxes and increasing defense spending. Between 2001 and 2003, George W. Bush followed the same script, introducing three sets of tax cuts and starting two wars. In February, 2009, Barack Obama introduced his stimulus. The real policy debate isn’t about Keynesianism versus the free market, it is about magnitudes and techniques: How much stimulus is necessary? And how should it be divided between government spending and tax cuts?
…
On both questions, Obama took the middle ground. His $800 billion stimulus program was smaller than many Keynesians, such as Christine Romer and Paul Krugman, wanted. (Romer reportedly pushed first for a $1.8 trillion package, then for $1.2 trillion.) Concentrated over a three-year period, it amounted to 1.1 per cent of G.D.P. in 2009, 2.4 per cent of G.D.P. in 2010, and 1.2 per cent of G.D.P. in 2011. So far, some $750 billion in stimulus money has been paid out: about $300 billion went to tax breaks for individuals and firms; roughly $235 billion was dispersed in the form of government contracts, grants, and loans; and another $225 billion was spent on entitlements—unemployment benefits, Medicaid, food stamps, and so on.
Jared Bernstein looks at the claim that federal financial aid causes college tuition to rise.
Research shows that tuitions at the public universities, where 75% of students enroll, are very much a function of revenue flows. Thus, when they hit recession—and remember, states must balance their budgets—a couple of unfortunate things tend to happen at the same time. First, tuitions tend to rise, and second, with the increase in unemployment, more young adults decide that given the weak job market, this would be a good time to get some more education. (Another interesting strain of research finds that increased state Medicaid costs has also led to higher tuition at public universities.)
…
So that’s when you’d actually want to ratchet up Federal aid, which is in fact what the Obama administration did with the American Opportunity Tax Credit and significant increase in Pell grants.
…
Conservatives who oppose these measures often complain that they don’t really lower tuitions because they’re directly capitalized into the price, but in the majority of cases, that’s wrong (Rep Paul Ryan goes after Pells particularly aggressively). We might well want to exclude those institutions that abuse federal aid from the programs that grant them, but they are a minority. If we want less advantaged kids to have a fair shake at getting to and getting through college, these aid programs are essential.
Economic policy reports, blog postings, and media stories of interest:
CHAPEL HILL (June 15, 2012) – Labor market conditions in North Carolina deteriorated in May, with the state losing 16,500 more jobs than it gained. This marked the third consecutive month of negative job growth in the state. While the statewide unemployment rate remained at the lowest level recorded since early 2009, the steady rate resulted from a contraction in the size of the labor force. These findings come from new data released by the Labor and Economic Analysis Division of the NC Department of Commerce.
“Key labor force indicators in North Carolina have weakened over the course of 2012,” said John Quinterno, a principal with South by North Strategies, Ltd., a research firm specializing in economic and social policy. “The state recorded gains in jobs in January and February, but growth has since turned negative. Over the past three months, the labor market has given back more than three-fourths of the gains logged earlier in the year.”
In May, North Carolina employers cut 16,500 more jobs than they added (- 0.4 percent). This was the largest monthly decline in absolute terms since June 2009. Last month, private-sector payrolls fell by 15,800 positions (-0.5 percent), and public-sector employment levels dipped by 700 positions (-0.1 percent). Within the private sector, professional and business services shed the most jobs (-7,000, -1.3 percent) due to sizable payroll reductions in the administrative and waste management subsector. The construction industry lost 4,800 jobs (-2.8 percent), followed by leisure and hospitality services (-3,600, -0.9 percent) and education and health services (-2,600, -0.5 percent). The trade, transportation, and utilities sector gained the most jobs (+1,900, +0.3 percent), followed by manufacturing, which netted 400 jobs (+0.1 percent).
A negative revision to the April payroll data found that the state lost 2,600 more jobs than first reported (-3,900 versus -1,300). With that revision, North Carolina now has, on net, 237,700 fewer payroll positions (-5.7 percent) than it did in December 2007. Since bottoming out in February 2010, the state has netted an average of 3,281 payroll jobs per month, resulting in a cumulative gain of 88,600 positions (+2.3 percent).
“Over the past few years, North Carolina had succeeded in closing some of the job gap caused by the recent recession,” noted Quinterno. “Over the past three months, however, the state’s labor market has given back a portion of those modest gains. Compared to December 2007, North Carolina has fewer payroll jobs in every major private industry sector except for educational and health services and professional and business services.”
The household data for May also point to a stagnant labor market. While the unemployment rate held constant at 9.4 percent, the steady rate was tied to a contraction in the size of the labor force. Over the month, the size of the labor force fell by 9,478 individuals (-0.2), driven by drops in both the numbers of employed persons (-5,803, -0.1 percent) and unemployed persons (-3,675, -0.8 percent) in the state.
While the unemployment rate of 9.4 percent is the lowest one recorded in the state since early 2009, unemployment remains widespread across North Carolina. Not only is the statewide unemployment rate 4.4 percentage points greater than it was almost 4.5 years ago, but the number of unemployed Tar Heels also is 90.6 percent higher.
To place the scale of unemployment in context, consider how the number of unemployed North Carolinians in May (435,908) exceeded the total population of the City of Raleigh, which was the state’s second most populous municipality in 2010. Furthermore, the number of people added to the unemployment rolls since 2007 (+207,188) is roughly equivalent to the population of the City of Fayetteville, which was the state’s sixth most populous city in 2010.
Other troubling labor market indicators include a statewide unemployment rate that has exceeded 10 percent in 35 of the last 41 months and the fact that the labor force participation rate has fallen steadily since January. Similarly, the share of the adult population with a job remains at a depressed level.
“North Carolina’s job market began 2012 on a positive note yet has been unable to maintain that momentum,” observed Quinterno. “The state has experienced negative net job growth for the past three months and has given back the bulk of the gains recorded earlier in the year. As has been the case for the past several years, the jobs data call out for policymakers to change course and pay considerably more attention to the ongoing, slow-moving crisis in the labor market.”
Email Sign-Up | 
RSS Feed
