Let's Have a Kevin Hassett Day!
They Also Serve Who Play Whack-a-Mole with People Who Do Not Understand the Gordon Equation for Valuing the Stock Market: The Last Kevin Hassett Post (For Now)

Jonathan Chait Hits One Out of the Park: Washington D.C. Masque of the Unemployed Edition

Jonathan Chait writes a column that would be a lifetime best for almost anybody else around, but for him is simply Jonathan Chait on a good day:

Why Washington Accepts Mass Unemployment: Good news! The economy added 163,000 jobs last month, just a bit over the level required to keep up with population growth. A return to a free fall now seems less likely. On the other hand, there is the small footnote that the return to full employment is nowhere in sight. The recovery looks safe for those of us who are not already screwed. That, sadly, has come to be the primary focus of our economic policy.

In the years since the collapse of 2008, the existence of mass unemployment has stopped being something the economic powers that be even pretend to regard as a crisis. To those directly impacted, the economic crisis is an emergency, a life-altering disaster the damage from which will endure for years. But most of those in a position to address it simply have not seen it in such terms. History will record that the economic elite has viewed the economic crisis from a perspective of detached complacency.

Two events from the last week have underscored this disturbing reality.

The Obama administration has tried to prevail upon Edward DeMarco… to offer lower mortgage rates to underwater home owners through Fannie Mae and Freddie Mac, which he controls. What interests me is not the proposal itself, nor even DeMarco’s obstinate refusal, but an editorial in the Washington Post applauding DeMarco for refusing to implement the program…. The Obama administration had argued to DeMarco that the mortgage relief was a pure win-win…. DeMarco replied that he believed the taxpayers would end up spending money on the deal: not much, but some. The Post’s thumbs-up editorial of DeMarco endorsed the reasoning that only a relief program that could be assured to cost the taxpayers nothing was worthwhile. It concluded, “with signs multiplying that the housing market may be finally bottoming out without this additional stimulus, perpetuating this particular battle does not strike us as the best use of the secretary’s time.”

There are signs we’ve hit bottom. Nothing to worry about here. Why risk the possibility of a small outlay merely to provide relief to hundreds of thousands of desperate people? This is such a perfect statement of the way the American elite has approached the economic crisis. They concede that it is a problem. But there are other problems, you know….

For millions and millions of Americans, the economic crisis is the worst event of their lives. They have lost jobs, homes, health insurance, opportunities for their children, seen their skills deteriorate, and lost their sense of self-worth. But from the perspective of those in a position to alleviate their suffering, the crisis is merely a sad and distant tragedy.

I think a number of things are going on:

  1. Some of it is, as a guy I know who spends his life flying around the country raising money says, these days you can quickly get a reservation at 7 pm on aFriday night at a good restaurant anywhere in the country–save within five miles of Capitol Hill. So neither the elite Washington journalists, nor the legislators, nor the executive-branch appointees, nor the lobbyists feel it, especially since the collapse of interest rates has created a world in which corporate profits are relatively high.
  2. Some of it is the collapse of the union movement: politicians no longer see anybody representing any slice of the population below the 10%, and no longer fear that the endorsements of those representing subgroups of those below the top 10% will go elsewhere.
  3. Some of it is the combination of rising wealth inequality–now coupled with that remarkable act of legislation from the bench that was Citizens United–which has made the voice of the 1% speak much more loudly in American politics than since before the Great Depression.
  4. Some of it is a cultural shift which has led percentiles 2% through 10% to think that what is good for the 1% is good for them, and what is good for the 90% is bad for them.
  5. Some of it is–and from my perspective this looms very large–the failure of the moderate Republicans to lay down policy markers during election season or after to create an environment for bipartisan technocratic agreement on policies to create a stronger economy. The Council of Economic Advisers chairs of the George W. Bush administration–Glenn Hubbard, Greg Mankiw, and Eddie Lazear–surely did not go to Washington to be shills for policies that would slow economic growth. Yet that is what they did, and if they had any positive impact on the policies actually pursued by the George W. Bush administration, I do not see it. By my reckoning, they now owe us bigtime: Lazear ought to be trying to settle his account by pushing for aggressive labor-matching reemployment policies and for preserving the end to health-insurance job lock in RomneyCare–excuse me, ObamaCare. Mankiw ought to be trying to settle his account by pushing for a restoration of the price-level path to its pre-2008 trend and a carbon tax. And Hubbard ought to be trying to settle his account by pushing for retention of RomneyCare–ObamaCare–policies to bend the cost curve, and pushing for aggressive government-sponsored mortgage refinancing policies. Yet of the three, only Hubbard has stepped up to the plate in a manner visible to me, and only on the last.
  6. Some of it is that the Obama Administration has not pushed the narrative line of: “the Republicans are blocking us from doing what we need to do to speed recovery”. Rhetorically, Obama took expansionary short-run fiscal policy off the table in January 2010 with his appointment of the Bowles-Simpson Commission and his call for a non-security discretionary spending freeze. Rhetorically, Obama has no standing to criticize Bernanke's monetary policy: he reappointed Bernanke without getting formal or informal commitments to do what was necessary to boost the employment-to-population ratio. Rhetorically, Obama has no standing to criticize DeMarco's housing policy: he was happy enough with DeMarco as head of FHFA not to have made confirming a replacement a priority. Those of us making the case that Obama's reelection cannot say that the policies Obama wanted would have generated a stronger economy had they not been blocked by Republicans and–ahem! Ben Nelson! Blanche Lincoln!–Democrats who wrongly thought “I stopped Obama from doing liberal things!” was the road to reelection. All we can say is–and this is very, very true–that the policies Romney and McConnell and Boehner and Ryan are running on would have made things as much worse as the policies of Cameron-Osborne-Clegg have made things in Great Britain over the past several years.
  7. Some of it is that social insurance has succeeded. People used to fear being poor and old, or being old and sick and in the gutter, or being disabled and in the gutter, or losing their job and then their house, or being too poor to buy food. Now they think they have Social Security, Medicare, Medicaid, Unemployment Insurance, and SNAP–and so to your typical voter the Democratic Party's pocketbook issues no longer seem as important. They do not realize the extent to which the Republicans' priorities arithmetically call for the elimination of these programs, or how threadbare our current safety net really is.

For every 12 ½ workers in the American economy right now, there is one guy who in normal times would be at work who right now is not. Figure that your typical household has two potential workers and six immediate relatives–children, siblings, parents, in-laws–who ought to be at work. That means that about 2/3 of American households are personally touched by cyclical unemployment.

But, apparently, not among the upper classes of Washington…