Skip to comments.Romer: ĎItís Aggregate Demand, Stupidí
Posted on 04/17/2010 11:38:35 AM PDT by reaganaut1
Christina Romer, chair of the presidents Council of Economic Advisers, says the reason unemployment remains so painfully high is clear: Its not the inadequacy or laziness of the workers or the long-standing mismatch between workers skills and employers needs. Its the old-fashioned Keynesian diagnosis: Too little demand in the economy.
The overwhelming weight of the evidence is that the current very highand very disturbinglevels of overall and long-term unemployment are not a separate, structural problem, but largely a cyclical one. It reflects the fact that we are still feeling the effects of the collapse of demand caused by the crisis. Indeed, at one point I had tentatively titled my talk Its Aggregate Demand, Stupid; but my chief of staff suggested that I find something a tad more dignified, Ms. Romer said in remarks prepared for a conference at Princeton University today.
It doesnt have to be this way, she argued, essentially making the case for more government stimulus to help the economy. We have the tools and the knowledge to counteract a shortfall in aggregate demand. We should be continuing to use them aggressively. Her comments contrasted with a recent flurry of optimism among some forecasters that the recovery may turn out to be stronger than the lackluster one many anticipated. We we are growing again, but not booming, she said. GDP is rising at a solid pace, but not as quickly as after other severe recessions and not as quickly as it needs to.
So whats the solution? More private demand is essential, she said, but government can do more than it is and Congress should embrace everything the president has proposed and then some. One targeted measure that is likely to be very effective is additional fiscal relief to the states, she said.
(Excerpt) Read more at blogs.wsj.com ...
Supply creates demand -- not the inverse.
Stupid, stupid Obama regime.
Anyone remember the unemployment--inflation charts that were in vogue during the Carter years? Economists drew a graph on a chart with the Ordinate (Y-axis) being unemployment and Abscissa (X-axis) being inflation. Prevailing wisdom was that this graph was stable and the Fed Reserve, through monetary policy, determined what inflation/unemployment point the economy operated on by setting interest rates.
Turned out there was another factor, and that was Fiscal policy. The greater the money spent by congress, the higher the graph migrated on the chart.
Adding more stimulus will make the inflation/unemployment curve worse.
We are doomed.
The healthcare bill, expiration of tax breaks from the Bush years, threat of amnesty for illegal aliens, threat of cap and tax, threat of forced unionization by the "Employee Free Of Choice Act" are all anti-business acts. There will be no recovery while the communists that are currently in power continue to press these issues.
Lets not forget the trashing of domestic energy development (oil leases) that drives up the price of oil and the cost of everything. The recent new legislation aimed at meat packing houses will likely put most of the small players out of business. Unions and environmental regulations will corral the big players.
I say we’re ‘oversupplied’.
We’re overweight in lots of ways. How many ‘Store and Locks’ do you see?
She is right about the demand for goods and services being suppressed and its effect on the groth of the economy.
But she is wrong about the cause and the solution.
The reason that demand is suppressed is uncertainty. The people are uncertain about the direction of the economy, the business people are uncertain about the future of taxes, interest rates and regulation policies of the government.
The people arent shopping and business is not hiring because the Obama government is dead set on changing all of the above.
If Obamaist want the numbers to improve make an announcement that no further changes will be forth coming.
If Obamaist want the numbers to improve drastically they should make an announcement that taxes will be cut and there will be a moratorium on new regulations.
” - - - the reason unemployment remains so painfully high is clear: Its not the inadequacy or laziness of the workers or the long-standing mismatch between workers skills and employers needs.”
It’s the unpredictability of the erratic driver at the wheel of the economy in the White House. Business is afraid to make a move because they don’t know what cockamamy brainstorm is going to excrete out of him next.
One problem Romer did not mention. American business has been forced to make do with fewer employees. These have maintained output levels. As business makes do with less, it will require much higher demand to increase the need for more workers.
This is what's tempering our spending. Both of us have jobs that are as secure as reasonbly possible. We have no financial obligations, i.e. kids grown, dependent expenses like college are behind us, and we have what would be considered a good amount of disposable income. But are we spending it...no way since we have no idea of the fall out from the HCR (will my insurance rates go through the roof) and taxes (end of Bush tax cuts, high property taxes to compensate for falling revenue, etc.)
Dear Ms. Romer:
Let’s try this experiment. Just print up ten million dollars, and send it to my house. I’ll let you know how it works out.