Monday, April 28, 2014

Today's Economic Predicament Is A Sustained, Subsidized Lethargy

From The Wall Street Journal, Opinion, "Demand-Side Policy Gave Us the Big Economic Fizzle: The unstimulating stimulus ignored basic principles of economic incentives." by Alan Reynolds:
The fact that employment has gradually risen from 140 million to 145.7 million since the recession ended is unremarkable. What is truly remarkable is that at the same time that job opportunities improved, the number of Americans who were neither working nor seeking work soared from 80.9 million to 91.4 million.
Demand-side economists focus on incentives to borrow and spend. Supply-side economists focus on incentives to work, save, invest and launch new businesses. Demand-side economists focus on the uses of income and debt (consumption). Supply-side economists focus on sources of income and wealth.
The time for demand-side gimmicks has long passed. The remarkably aggressive fiscal and monetary effort to stimulate demand did not stimulate demand. Even if it had worked, we can't pretend to be "fighting recession" forever. Today's economic predicament is not a cyclical crisis but a sustained, subsidized lethargy. Different tasks require different tools. When the number of job seekers falls twice as fast as the increased number of jobs, that is a supply-side problem.

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