How is this so hard to figure out?
If both sides of the aisle agree that businesses only hire when demand outstrips their ability to supply, then clearly somebody’s going to have to give a big handout to people so they can buy shit – Keynesian economics 101. Giving money to businesses – directly through bailouts or indirectly through tax breaks – doesn’t work. And why would it? If they’re making money, they have no reason to change their current methods.
It should also be fairly obvious that the demand that the people you handed all that money to will generate is directly related to just how much money you give them: They can only buy what they have money to buy. This is why the federal stimulus, being timely but anemic, had correspondingly anemic results. But, of course, there’s a political wall against large stimulus plans, because rich people don’t subscribe to Keynes. After all, corporate taxes and taxes on the wealthy are how we pay for federal stimuli.
In fact, this point is so fundamental that just about everything else will fall in place. Adam Davidson on the New York Times argues:
We don’t need to become a nation of app designers. An economic downturn is a great time to learn things — carpentry, say, or aerospace engineering — that others will eventually pay for: high-school dropouts should get their degrees and a year of specialized training; high-school grads who can’t afford a four-year school should get a community-college degree. Life will be tougher for liberal-arts majors if they don’t get training in how to apply a humanities education.
To that I have two points:
- Carpentry is shrinking. Studying carpentry right now is one of the worst choices one can make. Why? Because carpenters mostly work in home-building, and nobody’s building homes. There’s no demand. Demand comes first.
- Who’s going to pay for all this education? A lot of those people downtown are bemoaning their situation specifically because they’re buried in college debt and the economy that they thought they predicted well completely fell out from under them.
It’s funny that Davidson would use the term “eventually.” When you choose a college program – and I’ve always been taught all my life that college was not a trade school but something more fundamental to the functioning of a democracy and a civil society – you hope that there are corresponding jobs at the end of the two to four (or more) years it takes to get it. When that turns out not to be the case, should we double-down? How much debt should we shoulder?
Either way, a big fat direct federal stimulus would solve both problems quickly. After all, job training costs money, education cost money, and houses and consumer goods cost money. People can’t spend with money they don’t have, so start paying out!