Running a major central bank is never a particularly easy job. An enormous amount of pressure—the weight of an entire economy—is riding on you. Among your major responsibilities is the job of stomping on an economy when it begins to run too hot, generating economic weakness to defang inflation. You’re rarely given credit for your successes and often blamed for problems of others’ making. Yet most central bankers have it easy compared to Mario Draghi, who last week assumed the job of President of the European Central Bank. Draghi’s situation could scarcely be more difficult.
[Guest post by Matt O'Brien] If it doesn't feel like a recovery to you, there's more good reason for that today. The October jobs report added to a long line of underwhelming employment numbers since the economic recovery ostensibly began in June of 2009. The headline number of 80,000 jobs added was, at best, barely enough to keep up with population growth. At this pace, unemployment will come down to less painful levels approximately never. That said, the news wasn't all bad. Private sector job growth has been fairly resilient.
Both the left and the right have been consistently peddling the wrong prescriptions for our economy. Most liberals are focused on the need for additional fiscal stimulus, and dead-set against any premature moves toward what they consider “austerity.” Spending cuts, they say, would weaken the economy. Most conservatives are equally insistent that spending cuts need to begin now—and claim that by reducing expectations of future tax increases these cuts would help the economy.
[Guest post by Matt O'Brien] Pay no attention to soaring executive compensation, or Wall Street bonuses, or even to the latest CBO report on income distribution: skyrocketing income inequality the past few decades is just a “myth”—at least according to Jim Pethokoukis of the American Enterprise Institute.
Everybody agrees that the bipartisan deficit super committee had better hurry up and strike a deal to cut the federal budget by $1.2 trillion so it can meet its November 23 deadline. If it doesn’t, then all hell will break loose. Except it won’t. You may have lost track of the deficit story after Congress and President Obama averted catastrophe at the end of July by agreeing to raise the debt ceiling. Perhaps I can help.
When historians look back at this benighted moment in time, they may find themselves puzzled by how we refused to take the necessary steps to improve our economic situation. Depending on what happens in coming months, they may find that the best solutions—aggressive fiscal and monetary stimulus here in the United States, bank recapitalization and debt restructuring in the EU—were left on the table, while millions unnecessarily suffered. A footnote in that history may be the decision of Fannie Mae and Freddie Mac not to do more to help the housing market recover.
It’s all Greece’s fault. That’s what a lot of Europeans secretly—or not so secretly—think as they grumble at the prospect of coming up with yet more money to bail the eurozone out of its debt crisis. But what if that easy view of how Europe landed in its current predicament is not just simplistic, but wrong? Nonsense, argue the grumblers. Clearly the crisis started because debt in the eurozone’s periphery—Greece, Ireland, Portugal, and Spain—became so large that investors grew frightened that entire countries were at risk of default.
[Guest post by Matt O'Brien] It is better than zero. That is about the best that can be said about the September jobs report, on the heels of last month's numbers that showed precisely zero jobs added in August.
[Guest post by Matt O'Brien] Last week, as the Obama administration rolled out its American Jobs Act, a liberal group called the Progressive Change Campaign Committee launched a strange ad campaign of its own: “[Obama economic advisor] Jason Furman wants you to work for free,” the ads blasted.
The centerpiece of the jobs plan unveiled by President Obama Thursday night—the extension and expansion of payroll tax cuts to employees totaling $175 billion—has turned out to be among its most controversial aspects. Indeed, policymakers and commentators from across the political spectrum have argued that its stimulative effects could be negligible.