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http://www.nytimes.com/2014/12/08/opinion/paul-krugman-recovery-at-last.html?rref=collection%2Fcolumn%2Fpaul-krugman
Last week we got an actually good employment report
— arguably the first truly good report in a long time. The U.S. economy
added well over 300,000 jobs; wages, which have been stagnant for far
too long, picked up a bit. Other indicators,
like the rate at which workers are quitting (a sign that they expect to
find new jobs), continue to improve. We’re still nowhere near full
employment, but getting there no longer seems like an impossible dream.
And
there are some important lessons from this belated good news. It
doesn’t vindicate policies that permitted seven years and counting of
depressed incomes and employment. But it does put the lie to some of the
nonsense you hear about why the economy has lagged.
Let’s talk first about reasons not to celebrate.
Things
are finally looking better for American workers, but this improvement
comes after years of suffering, with long-term unemployment in
particular lingering at levels not seen since the 1930s. Millions of
families lost their homes, their savings, or both. Many young Americans
graduated into a labor market that didn’t want their skills, and will
never get back onto the career tracks they should have had.
And
the long slump hasn’t just scarred families; it has done immense damage
to our long-run prospects. Estimates of the economy’s potential — the
amount it can produce if and when it finally reaches full employment —
have been steadily marked down in recent years, and many researchers now
believe that the slump itself damaged future potential.
So it has been a terrible seven years, and even a string of good job reports won’t undo the damage. Why was it so bad?
You
often hear claims, sometimes from pundits who should know better, that
nobody predicted a sluggish recovery, and that this proves that
mainstream macroeconomics is all wrong. The truth is that many
economists, myself included, predicted a slow recovery from the very beginning. Why?
The
answer, in brief, is that there are recessions and then there are
recessions. Some recessions are deliberately engineered to cool off an
overheated, inflating economy. For example, the Fed caused the 1981-82
recession with tight-money policies that temporarily sent interest rates
to almost 20 percent. And ending that recession was easy: Once the Fed
decided that we had suffered enough, it relented, interest rates
tumbled, and it was morning in America.
But “postmodern” recessions,
like the downturns of 2001 and 2007-9, reflect bursting bubbles rather
than tight money, and they’re hard to end; even if the Fed cuts interest
rates all the way to zero, it may find itself pushing on a string,
unable to have much of a positive effect. As a result, you don’t expect
to see V-shaped recoveries like 1982-84 — and sure enough, we didn’t.
This
doesn’t mean that we were fated to experience a seven-year slump. We
could have had a much faster recovery if the U.S. government had ramped
up public investment and put more money in the hands of families likely
to spend it. But the Obama stimulus
was much too small and short-lived — as many of us warned, in advance,
it would be — and since 2010 what we have actually seen, thanks to
scorched-earth Republican opposition on all fronts, are unprecedented
cutbacks in government spending, especially investment, and in
government employment.
O.K.,
at this point I’m sure many readers are thinking that they’ve been
hearing a very different story about what went wrong — the conservative
story that attributes the sluggish recovery to the terrible, horrible,
no-good attitude of the Obama administration. The president, we’re told,
scared businesspeople by talking about “fat cats” on Wall Street and
generally looking at them funny. Also, Obamacare has killed jobs, right?
Which
is where the new job numbers come in. At this point we have enough data
points to compare the job recovery under President Obama with the job
recovery under former President George W. Bush, who also presided over a
postmodern recession but certainly never insulted fat cats. And by any
measure you might choose — but especially if you compare rates of job
creation in the private sector — the Obama recovery has been stronger and faster. Oh, and its pace has picked up over the past year, as health reform has gone fully into effect.
Just
to be clear, I’m not calling the Obama-era economy a success story. We
needed faster job growth this time around than under Mr. Bush, because
the recession was deeper, and unemployment stayed far too high for far
too long. But we can now say with confidence that the recovery’s
weakness had nothing to do with Mr. Obama’s (falsely) alleged
anti-business slant. What it reflected, instead, was the damage done by
government paralysis — paralysis that has, alas, richly rewarded the
very politicians who caused it.
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