I have the questionable distinction of appearing
on Larry Kudlow's CNBC program several times a week, arguing with people
whose positions under normal circumstances would get no serious
attention, and defending policies I would have thought so clearly and
obviously defensible they should need no justification. But we are
living through strange times. The economy is so bad that the social
fabric is coming undone, and what used to be merely weird economic
theories have become debatable public policies.
Tonight it was Harvard Professor Robert Barro, who opined in today's
Wall Street Journal that America's high rate of long-term unemployment
is the consequence rather than the cause of today's extended
unemployment insurance benefits.
In theory, Barro is correct. If people who lose their jobs receive
generous unemployment benefits they might stay unemployed longer than if
they got nothing. But that's hardly a reason to jettison unemployment
benefits or turn our backs on millions of Americans who through no fault
of their own remain jobless in the worst economy since the Great
Yet moral hazard lurks in every conservative brain. It's also true
that if we got rid of lifeguards and let more swimmers drown, fewer
people would venture into the water. And if we got rid of fire
departments and more houses burned to the ground, fewer people would use
stoves. A civil society is not based on the principle of tough love.
In point of fact, most states provide unemployment benefits that are
only a fraction of the wages and benefits people lost when their jobs
disappeared. Indeed, fewer than 40-percent of the unemployed in most
states are even eligible for benefits, because states require applicants
to have been in a full-time job longer than most jobless had one. A
majority of the jobless typically have moved from job to job before they
failed to find a new one, or have held a number of part-time jobs.
So it's hard to make the case that many of the unemployed have chosen
to remain jobless and collect unemployment benefits rather than work.
Anyone who bothered to step into the real world would see the
absurdity of Barro's position. Right now, there are roughly five
applicants for every job opening in America. If the job requires
relatively few skills, hundreds of applicants line up for it. The Bureau
of Labor Statistics says 15-percent of people without college degrees
are jobless today; that's not counting large numbers too discouraged
even to look for work.
Barro argues the rate of unemployment in this Great Jobs Recession is
comparable to what it was in the 1981-82 recession, but the rate of
long-term unemployed then was nowhere as high as it is now. He concludes
this is because unemployment benefits didn't last nearly as long in
1981 and 82 as they do now.
He fails to see -- or disclose -- that the 81-82 recession was far more
benign than this one, and over far sooner. It was caused by Paul
Volcker and the Fed yanking up interest rates to break the back of
inflation -- and overshooting. When they pulled interest rates down
again, the economy shot back to life.
The Great Jobs Recession is far more severe. It's continuing far
longer. It was caused by the bursting of a giant housing bubble, abetted
by the excesses of Wall Street. Home values are still 20- to 30-percent
below where they were in 1997. The Fed is powerless because consumers
cannot and will not buy enough to bring the economy back to life.
A record number of Americans are unemployed for a record length of
time. This is a national tragedy. It is to the nation's credit that many
are receiving unemployment benefits. This is good not only for them and
their families but also for the economy as a whole, because it allows
them to spend and thereby keep others in jobs. That a noted professor
would argue against this is obscene.