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Regression to the Mean: Elites Start to Recognize Failure on Jobs

It’s been amusing over the past several days to watch so-called “credible” people come around to where us dirty hippies have been on the economy for going on two years. For instance, Nick Kristof (who admittedly has other pursuits) suddenly figured out that persistently high unemployment may be a problem:

I’ve spent a chunk of summer vacation visiting old friends here, and I can’t help feeling that national politicians and national journalists alike have dropped the ball on jobs. Some 25 million Americans are unemployed or underemployed — that’s more than 16 percent of the work force — but jobs haven’t been nearly high enough on the national agenda.

When Americans are polled about the issue they care most about, the answer by a two-to-one margin is jobs. The Boston Globe found that during President Obama’s Twitter “town hall” last month, the issue that the public most wanted to ask about was, by far, jobs. Yet during the previous two weeks of White House news briefings, reporters were far more likely to ask about political warfare with Republicans.

(I’m an offender, too: I asked President Obama a question at the Twitter town hall, and it was a gotcha query about his negotiations with Republicans. I’m sorry that I missed the chance to push him on the issue that Americans care most about.)

Well, at least he’s sorry. Meanwhile, he should be sorry for taking up a slot in a town hall meeting for the public when as a New York Times pundit he has all kinds of opportunities to get questions answered by the Administration.

This belief that jobs must be atop the agenda extends to the new head of the IMF, whose hair has been on fire since she took over the job. Yes, she’s still speaking the central banker/finance minister language of fiscal “consolidation,” but she’s also saying things like this:

Fiscal policy must navigate between the twin perils of losing credibility and undercutting recovery. The precise path is different for each country. But to meet the credibility test, each country needs a dual focus: a primary emphasis on durable measures that will deliver savings tomorrow which, in turn, will help to create as much space as possible for supporting growth today—at least by permitting a slower pace of consolidation where possible […]

Monetary policy also should remain highly accommodative, as the risk of recession outweighs the risk of inflation. This is particularly true as (i) in most advanced economies inflation expectations are well anchored; and (ii) pressures from energy and food prices are abating. So policymakers should stand ready, as needed, to dive back into unconventional waters.

Micro-level policy actions to relieve balance sheet pressures—felt by households, banks, and governments—are equally important. We must get to the root of the problem. Without this, we will endure a painful and drawn-out adjustment process. Structural reforms will surely help boost productivity and growth over time, but we should take care not to weaken demand in the short term.

She might as well have held up a sign reading “do something!” She’s actually calling for aggressive principal reduction programs. I’m not on board with her insistence on a TARP for Europe, and I suspect Europeans won’t be either, but most of this is first-rate.

Heck, even Republican town halls in South Dakota aren’t buying the prevailing wisdom from their representatives, that now is the time to have a big conversation about entitlement spending (or Ponzi schemes, in the more common parlance of the right).

“Do something,” Thune said Wednesday after a town hall meeting at the Brandon Municipal Golf Course. “Why can’t you work together? There’s a high level of frustration with the inaction, and there’s a lack of confidence in the country and the economy. They want to see us get something done.”

That’s one of the major insights he’ll take back to Washington, D.C. after the August recess, he said.

It ranks behind “don’t cut my Social Security and Medicare. I’ve heard that quite a bit,” Thune said.

Just because there’s a new recognition of the central problems – jobs, not entitlements – doesn’t mean anything of value will be done about it. But it’s fun to stay in place and watch the world change around you.

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David Dayen

David Dayen

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