I don’t expect it to go down appreciably. That’s what — our forecast, and most of the private forecasts say the same thing.
As to why that might be, Goolsbee makes excuses:
I think it’s fair to say that after this recession that began in 2007 put us very deep in the hole, it’s going to be a long battle to get out of that deep of a recession. So we’ve had positive private sector job growth for eight months.
Of course the “solution” is more of the same, as usual:
…what the president is outlining now, as you’ve seen in his announcements this past week, are ways that the government can catalyze and facilitate the private sector to increase its investment in factories and equipment, in R&D, in hiring people in this country. That’s what we need to do.
Ed Morrissey doesn’t think so, and has an alternate explanation:
It’s because Obama and Goolsbee didn’t learn any lessons from Europe’s debt crisis, and continue to run up huge deficits and push for tax hikes instead of spending cuts.
The main headwinds in this economy come from Obamanomics and ObamaCare.
The debate then turns on what to do, based on those assumptions. Republicans think that the problem is the Administration trying to pick winners, and the best thing to do is cut taxes, or at minimum don’t let taxes go up or raise them. Leftoids in general predictably shriek that the proposed tax increases won’t hurt anybody, that reducing taxes is a gift to “the rich” and utterly unconscionable, and the only way to do it is more top-down stimulus.
Both are making the same assumption: that the problem is not enough money in the hands of people who will spend it. It follows that what is necessary is to see to it that the people have money, and the argument is how to get money into the people’s hands. Both are wrong.
There is plenty of money “out there” in the economy. The problem is, it isn’t moving. Money that just sits there in safe investments, bank accounts, and mattress covers is good for the individuals that have it, but bad for the economy over all — the so-called “paradox of saving”. Lending for investment breaks the paradox, allowing the money to move as the economy sees it and therefore create wealth while the money’s custodian (whether or not “owner”) sees it as safely stationary and available when needed. If all those trillions under (metaphorical) pillows started moving, the economy would move as well.
So why doesn’t it move?
Money doesn’t move when its owners think it will disappear if it does. Different people have different tolerances for risk, and people who control money — whether they “own” it in any sensible meaning of the word or are custodians of it for others — let or make the money move when they feel the risk of losing it is acceptable. One of the factors in that risk assessment is how difficult it will be to accomplish some economically significant purpose when the money moves. Moving money expands the economy, and the owner or custodian expects to get some fraction of that increase back as “profit”; the more difficult it is to accomplish an economically significant task with the money, the less (or less likely) the overall increase will be, and the less their share of that increase will be. Another factor is whether or not it will simply vanish. No merchant will load a bag of gold on the pack-train if he thinks bandits will overpower him and take it.
Around the developed economies, public sector employment is on the rise (pdf). This is often cited as an anodyne or corrective for diminishing private sector employment — if many people are unemployed and therefore unable to buy things and make money move, giving them jobs in Government will give them economic power and get things moving.
What advocates of that course forget is the content of public sector jobs. A “public sector employee” is a Government bureaucrat, and it is the fundamental task of a Government bureaucrat to say “No!” to economic activity. The reason for saying “No!” is almost always virtuous, at least on the surface — EPA bureaucrats must say “No!” to activities that would harm the environment, and financial regulators must say “No!” to financial shenanigans that hurt people. Unfortunately every such “No!” adds to the difficulty of economic activity, and it is economic activity that grows the economy. As more and more bureaucrats enforcing more and more regulations are added to the system, the custodians of money see more and more barriers to gainful economic activity and less and less chance of their sharing any portion of the resulting increased wealth, and the money stays fixed in place.
Even public-sector “investors” are hampered by that effect. By the very conditions of their employment they must be sticklers for the rules, and thus end up even more hampered by the other bureaucrats in the system. A Transportation Department wishing to spend money on road-building must dot every “i” and cross every “t” of the environmental and financial regulations applicable to the project, and the money doesn’t move out to consumers and other investors for a long time, if ever. An EPA bureaucrat designing an environmental cleanup that will employ workers and result in more valuable ambient conditions must satisfy Transportation bureaucrats that the roads won’t be adversely affected and financial bureaucrats that the money is accounted for properly. “Shovel ready” becomes a myth — nothing happens until all the forms are filled out and passed through the regulatory system, and the more bureaucrats involved the longer that takes. The money sits, even if it’s been appropriated.
Adding to that is financial certainty (not “uncertainty”, as is often cited). It is clear, both from their public statements and their visible actions, that Barack Obama and his advisors base their plans and proposals on the default, and seldom questioned, basic assumption of the Left: that “production” is entirely decoupled from “wealth”, and the latter appears spontaneously and randomly. The very notion that a custodian of wealth might have done something to cause that wealth to exist does not exist in their thinking. Wealth simply appears without rhyme, reason, or any human-controlled process; it follows that the distribution of wealth is unfair because some get more than others, that anyone wishing to hold on to an accumulation of wealth is selfish, and any attempt to increase an accumulation of wealth is greedy. They are therefore alert to any concentration of wealth, and prompt in seizing any such where possible, both to achieve a more-even distribution and to punish greed and selfishness.
Because of the way the modern monetary system works (which is beyond the scope of this essay) an attempt to seize idle wealth is like picking up an ice cube with red-hot tongs. The act of seizing makes the wealth vanish, and the result is that the custodian loses without much or any corresponding gain to the ones doing the seizing. That effect is painfully clear from both theory and practice: so as long as the money stays in place it is effectively untakeable. If it moves, though, it can be taken, just as the bag of gold in the merchant’s saddlebag is vulnerable to robbers.
Both custodians of wealth and those anxious to seize it know that, so the takers lurk anxiously in ambush along the trail, and custodians of wealth insure that the doors of their safes are secure and feel frequently under the pillow to assure themselves that the money is still there. Meanwhile the bureaucratic regulators send inspectors to make it as difficult as possible to load the gold on the donkey in the first place — the bag must be of approved quality and strength, the saddlebags must be secure, and the pack-beast must be healthy, well-fed, and not overburdened; the route must be known in advance and properly approved, to insure that neither the merchant nor his beasts fall off a cliff or wander into a lava-flow (and, the merchant darkly assumes, to insure that it passes the ambush site).
Result: Stasis. The bag of gold might as well be so much sand, because it is not used to pay the wages of muleteers and caravan-guards, nor does it buy products to return to the market. Nothing moves, the economy doesn’t so much shrink as cease to exist, and until the prevalence of takers (whatever their stated motives) and “No!”-sayers (however virtuous) is reduced, the stasis will continue. The notion that adding more money to the system will break the stasis is ludicrous.