Up and Down

The best way to judge an economy is to look at who is up and who is down.

So, who is up and who is down in the current American economy? If you are significantly invested in the stock market, you are way up. But if you are looking for a job, then the prospects are that you could be looking for a long time. Isn’t that kind of the opposite of what President Obama has been saying since the 2008 campaign his priorities were for the economy? He has repeatedly said he wants everyone to get “a fair shot” and that the economy shouldn’t be rigged in favor of those who are already well off.

To be fair, a lot of people with money in the stock market are not super-rich. A lot of them are ordinary people who have invested their savings or who have money invested through retirement plans. And not everyone who is unemployed is suffering. But the fact remains that things have not gone in the direction in which the president said he would take the country. The administration is happy enough to trumpet new record highs in the stock indexes because it will naturally point to anything that shows the economy improving. But the fact is that the rise in stock prices hasn’t translated into a lot of job growth.

Yes, the unemployment rate has come down since it hit a peak of 10.1 percent in 2009. But it is still way above normal historical levels. And the official rate (called U-3) actually understates the problem since it doesn’t include people who are underemployed or who have given up looking for work—an increasingly large segment of the population. The U-6 rate, which includes the underemployed and discouraged jobseekers, was at 13.9 percent in April.

If you asked an administration spokesperson about this, he or she might well say that this only underscores how bad things had gotten under previous administrations and that still more time is needed to put things right. But given who is up and who is down, is the trend really going in the right direction? And would anyone have taken, say, George W. Bush seriously if he had laid the blame for any economic problems in 2005 at the feet of Bill Clinton? Only Barack Obama seems to get away with this trick.

Still, things could be worse. The official unemployment rate in the European Union recently hit a record 12 percent. Europe has always had higher unemployment than the U.S., which leads us to wonder why some economists and politicians say that the U.S. should have an economy that is more like Europe’s. When it is pointed out to those people that Europe invariably has higher unemployment and a somewhat lower living standard than the U.S., they reply that it doesn’t matter because European countries have a much better social safety net.

Think about that for a moment. Taking that kind of thinking to its logical extreme, why should anybody have to have a job at all? Just let the government print money and then hand it out to everyone. The obvious problem, of course, is that money would become useless because, with no one working, there would be no goods or services to purchase.

Okay then, says my imaginary interlocutor (let’s call him Paul Krugman), just employ people in jobs that are really necessary—like doctors, teachers, police, fire fighters, high-end restaurant staff and, of course, people to run mint’s printing presses—and pay them with the government’s printed money. What’s wrong with that? Heck, we’ll even pretend that there will be no problem finding people to fill those jobs even though their standard of living would be no higher than people who do no work at all.

The problem is that—even in spite of the fact that most people like to feel useful and want to be doing something—you will never be able to find enough people to fill all the jobs needed. Since everyone in the country has all the money they want, demand will be guaranteed to outstrip supply. And no matter how much money the government has printed for you, it will never be enough because the price of everything you want will keep going up because of chronic shortages. To get around this, there will be no choice but to start rationing goods and services and, if that doesn’t do the trick, then to use the power of the government to compel people to work in jobs that are deemed necessary and desirable—at gunpoint if necessary. Sure, it doesn’t exactly sound like a picnic but, hey, at least you’re not under the heel of the capitalist oppressors.

But that’s all a fantasy, though, right? After all, the government isn’t really going to print loads of money just to try keeping people’s living standards up, is it? So how would we know if they were doing that? Well, interest rates would drop to near zero. And there would be a boom in the stock market.

Wasn’t that another one of the president’s aims? To end the cycle of boom and bust?