We are clearly at a point where our sanity is being put to the acid test, which is to keep doing the same things to jump start the economy five years after the end of the last recession and expect a different result. Some very bright and perceptive people have written and spoken voluminously on this point, to no avail with this administration or, with the possible exception of House Budget Chairman Paul Ryan, with this Congress.
The facts are well known–the slowest recovery since World War II and the lowest workforce participation rate since the Carter doldrums of 1978–yet we continue to pursue Federal Reserve monetary policy that distorts capital flows and pricing while piling on even more regulatory burdens and employer uncertainties through abominations like Dodd-Frank and Obamacare. Meanwhile, the major economic debates in Congress are about extending unemployment insurance and increasing the minimum wage, which are mainly nothing more than grandstanding issues that miss the point entirely.
Recently, Glenn Hubbard, dean of Columbia Business School and former chairman of the Council of Economic Advisers under George W. Bush, has written a good essay for The Wall Street Journal in which he makes a strong case for structural change, beginning as follows:
“As I see it, the policy response to our disturbing doldrums in the labor market has indeed struck the wrong balance. Whatever can be said for shorter term measures to jump start job creation and business activity, it seems clear by this late date that our problems are in no small part structural. What we need most urgently is to rethink the federal government’s wider role in the labor market.”
And he goes from there to describe a number of areas in need of bold structural overhaul, primarily including Obamacare, unemployment insurance, and Social Security, all of which embody significant disincentives to work as currently structured and all of which offer opportunities for supply-side approaches that would reverse many of the perverse incentives. (He didn’t mention public education overhaul, which I would certainly place at near the top of my list for structural change.)
This won’t be easy and Hubbard acknowledges that it will require the Democrats to confront the failure of their stimulus and demand-side policies to create jobs. Good luck. But the alternative is to continue to watch able-bodied Americans exit the labor force and realize that beyond the absence of a paycheck is the loss of the individual dignity of work and the larger erosion of America’s culture of work ethic.