Saturday, August 1, 2009

Unemployment Part 3: Reading the Stitches on a Fast Ball

The Council of Economic Advisors, which is headed by Summers, Romer, Bernstein and Goolsbee......with the help of Congress, have apparently discovered an old economic theory: Unemployment.

Let us review:

(1) Simultaneously deploying the theory of Keynesian Deficit Government Spending and the theory of Quantitative Easing, in a current environment of High Existing Government Debt (remember both theories were developed in an environment of zero or low government debt), it becomes a very dicey project (Japan 2001-2006). Japan is experiencing a 20 year down turn/recession,

(2) It would be extremely important, if deploying Keynesian Deficit spending:

(a) never base the plan on Political-Political, rather base the plan on Political-Economy,

(b) use the historical format of Infrastructure Spending rather than Social Engineering,

(3) If one deploys Keynesian Deficit Government spending, then at the very least understand what Keynes said: Deficit Government Spending is temporary until the Private Sector Recovers.

(4) Exactly what policies exist to create incentives for Private Capital Formation which leads to Private Sector Jobs? Would that be the specter of much higher Federal and State personal and business taxes? Tax and Trade (energy tax)? Socialized Medicine (tax)? Over Regulation (reduce profits at the margin)?

(5) The Unemployment Statistic published from the Department of Labor does not include the Self Employed nor Contract Labor which make up 40% of the Workforce. Hence the Unemployment rate is North of 15%.

(6) Remember Capital is Unemployed too. Capacity Utilization is at 65%.

You decide. Are (1) - (6) job creators?

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