Jeff Frankel is Professor of Capital Formation and Growth, Kennedy School of Government Harvard University
The NBER announcement of the end of the recession coincides with the beginning of the loud weeping of the rich (1%), as everyone can watch in the blogosphere right now. How bizarre is this recession?
Yes, the recession was unusual in a number of respects
. But I am not sure what is the coincidence you speak of. As for the richest 1%, they would have no chance of winning the benefit of an extension of all the Bush tax cuts if it were not for the fact that a huge chunk of the American electorate has gotten into the habit of voting against their own economic interests, and those of their grandchildren .
What has to be done, in order to strengthen the “slow continuation of the current (inadequate) recovery”?
The desirable policy response to our current situation is a combination of (1) sensible fiscal stimulus today, designed to maximize bang for the buck (where “bang” is adding to demand for goods and services and “buck” is how much the spending adds to the national debt), and simultaneously (2) taking steps today to put the long-term fiscal path back on a more responsible footing, analogous to the steps taken in the 1990s but reversed in 2001
. In my view the best way of doing that would be reform of social security and the health care system . But the Republicans in the Congress block almost every attempt by the Obama Administration to do these things .
What are the particular reasons for the very high and long-term unemployment? Aggregate demand or skills mismatch?
I would put aggregate demand at the top of the list of reasons. By the end of the 1990s we had achieved the highest ratio of jobs to population in American history, notwithstanding concerns about trade competitiveness etc
. What has changed is the national debt, the financial crisis, and the recession.
Thank you very much.
Jeff Frankel is James W. Harpel Professor of Capital Formation and Growth at
’s Kennedy School of Government. He directs the program in International Finance and Macroeconomics at the National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, which officially declares recessions. Appointed to the Council of Economic Advisers by President Clinton in 1996 and subsequently confirmed by the Senate, he served until 1999. Harvard University