Yesterday’s diatribe from Paul Krugman (NYT, 1/29/10) concerned the federal government’s failure to fix the unemployment problem, which he called short-term, and the looming deficit, which is a long-term problem. As for the short-term fix, he felt it was a virtual no-brainer that we should pump up the deficit in order to create jobs now. But he knows that’s not going to happen. He blamed the “political culture” that rewards hypocrisy and punishes serious efforts to reform the economy. Specifically, he thinks the job-creation program was simply too weak to have an impact on growing unemployment.
I have my doubts about that. The “stimulus” was meant to fund these “shovel-ready” projects that would fix our crumbling infrastructure. For the most part, these had to be short-term and small-scale, and were probably heavily involved with transportation. You couldn’t count on many permanent jobs from them, and the benefits to the overall economy would be small, and not immediate. With that in mind, why should we have thought a bigger stimulus would have had better results? Local bureaucracies can be as slow as Washington, and local business leaders and politicians want their own piece of the pie, often killing these projects at the outset.
I was glad to see that President Obama is taking a different approach now (NYT, B1, 1/30/10). He’s looking to private companies for the answer, using tax credits and Social Security payroll holidays when they hire new employees. He’s also watching out that they don’t “game the system” by laying off workers in order to get these breaks when they hire the new ones.
Government is simply not efficient when it moves into a dynamic, marketplace economy. If Obama can implement these changes in the tax code and regulations, and do it quickly, we might see better results, dollar-for-dollar, than we saw in the stimulus program.