Third Depression: Barriers to Recovery
A lot stands in the way of returning to pre-collapse employment levels in the USA.
Dave Schuler argues that there area few stumbling blocks to getting to the status quo ante of what Paul Krugman is terming our Third Depression:
- We have been investing very heavily in the healthcare sector, a sector which creates fewer jobs per dollar than most others, without being willing to control costs there. The “doctor fix” making its way through the Congress as we speak is the latest example of that lack of willingness.
- We have persisted in subsidizing things, e.g. housing construction, oil consumption, that are not in our long-term interests. The long-term eventually arrives.
- We subsidize the incomes of people who don’t need subsidies.
- We undertake too much with our military and spend too much on it.
- We have imposed an increasing administrative burden on businesses in the form of regulations, especially the execrable Sarbanes-Oxley. I know of no business that has improved its actual accountability by implementing it. But I know of lots that are bearing substantial costs by doing so.
- Government at all levels is mired in the 1950’s in business methods, personnel policies and procedures, and, most of all, costs.
- We should never have admitted China to the WTO or granted it permanent most favored nation trading status without exacting much more stringent actions from the country including abandoning their peg on the dollar and allowing currency to be freely traded in China. China is so vast it can shake the world economy and, since it continues to be authoritarian, it can do so as a matter of policy.
- The policies of the Fed, contributing to asset inflation, made us think we were better off than we were.
Other than that, though, piece of cake.
He brings that up a lot, but what’s his proof?
In any case, heavy investment in Health Care is not a bad thing, or possibly an avoidable one. We have an aging population that will require lots of medical care and likely pills, and medical advances/biotech remain of the biggest possible arenas for potential research. It’s natural that there would be a lot of investment in that area.
Probably true, although changing that on a significant basis would require a major re-evaluation of what the US’s role is in terms of both national security as well as our security commitments abroad.
He brings that up a lot, but what’s his proof?
Presumably, it’s a function of higher concentration of wealth in that sector.
Heh, “don’t worry, it’s even worse than Krugman thinks.”
I don’t usually think of Krugman as the optimist.
The statement “average and median wages in sector X are higher than average and median wages in sectory Y” is equlvalent to saying that a dollar invested in sector X produces fewer jobs than a dollar invested in sector Y all other things being equal. It’s tautological.
Wages are higher in the healthcare sector. Go on over to the Bureau of Labor Statistics and check for yourself.
Yes, “all other things being equal” (and weren’t you just criticizing theoreticians in that post over at The Glittering Eye?). But all other things are generally not equal, and higher wages in the health care sector could just as easily be a result of greatly increased demand for the services that employ them .