South By North Strategies, Ltd.

Riding The Wayback Machine

Paul Krugman reminisces about the economic and social policy debates of the 1980s.

If you’re an intellectual of a certain age, you remember that in the 80s and maybe a bit of a way into the 90s it was common on the right to see American society as being in a process of catastrophic moral decline, descending into social anarchy. Crime would continue to rise, chaos would continue to spread, until and unless we returned to the Victorian virtues — and more specifically, to Dickensian social policies, in which only the deserving poor — as so designated by faith-based charities — received help. That, by the way, was the meaning of “compassionate conservatism”, which was about dismantling the welfare state in favor of private charity.
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But then, in the 90s, a funny thing happened: in many ways, American society began healing. True, out-of-wedlock births continued to rise, although at a much slower pace. But crime plunged, and in general our society began to look a lot more functional. If you remember what New York was like in the Bonfire of the Vanities days, and you walk the city now, the transformation is awesome — and somehow that happened despite Social Security, Medicare, and Medicaid.

Around The Dial – September 6, 2011

Economic policy reports, blog postings, and media stories of interest:

• Simon Johnson poses three questions to the financial stability oversight council.
• Jared Bernstein argues that deregulation isn’t a jobs program.
• Martin Wolf explains why Britain “must escape its longest depression.”
• Nassim Taleb and Mark Spitznagel describe “the great bank robbery.”
• The News & Record reports on rising food stamp caseloads.

Bad Jobs During Bad Times

In a post at Policy Shop, Paul Osterman of MIT that the high proportion of poor quality jobs in the American economy is a problem as severe as unemployment.

The second jobs crisis is more subtle but no less serious. Far too many jobs fall below the standard that most Americans would consider decent work. Last year 19.7 percent of working adults held jobs that would put a family of four below the poverty line even if they worked full time and full year. These people work in factories and hotels, in restaurants and hospitals, on construction sites and in day care centers. The problem spans all races and ethnic groups and includes large numbers of native born Americans as well as immigrants.
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Why are there so many bad jobs? The key explanation is that working Americans have not shared in benefits of economic growth. In 2000 the median wage of adult workers was (in 2010 dollars) $17.41 and by 2010 it had barely grown to $17.60. During this same period the annual increase of productivity was over 2.5 percent. Who benefited from this growth? Between 1993 and 2008 the top 1 percent captured 52 percent of all new income in the economy. This is not just a story about dividends and stocks: the share of earnings captured by the top 1 percent nearly doubled.

Quelle Surprise!

Yves Smith of Naked Capitalism pays attention and states the obvious while wondering while it isn’t so obvious to many.

I’m a bit surprised that anyone can be surprised by the lousy jobs numbers for August. Consumers are worried and too many economists have been trying to draw trend lines through noise in retail spending data and call it proof that a recovery in under way. Broad measures of unemployment are stuck in the upper teens, big companies are continuing to shed jobs, small businesses on the whole are pessimistic, state budgets are under pressure and federal deficit spending is set to be reined in. With housing in most markets not having bottomed, the overwhelming majority of consumers having taking a wealth hit, businesses not investing and government not taking up the slack, where exactly is growth supposed to come from? The tooth fairy?
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But why has the media been so clueless? Cynics might argue that they are paid to be clueless, and there is more than a bit of truth in that. However, I suspect at least as powerful is that the overwhelming majority of reporters live in New York or Washington DC, two cities relatively unaffected by the downturn. DC is awash in lobbyist dollars and New York has been kept afloat by super low interest rates and other sops to the banks.

Editor’s Note

Policy Points is taking a few days off to celebrate the Labor Day holiday. Normal posting will resume on Tuesday, September 6, 2011.

Thank you for your interest in the blog.