In a column, University of California, Berkeley Professor J. Bradford DeLong explains just how massively our federal government has failed us when it comes to macroeconomic policy.
At least, that is what I said when I lectured on economic history back in 2007. Today, we have next to no hard-money lobby, almost all investors have substantially diversified portfolios, and nearly everybody suffers mightily when unemployment is high and capacity utilization and spending are low.
Economists today know a great deal more – albeit not as much as we would like – about how monetary, banking, and fiscal policies affect the flow of nominal spending, and their findings are the topic of a great deal of open and deep political and public intellectual discussion. And the working classes all have the vote.
Thus, I would confidently lecture only three short years ago that the days when governments could stand back and let the business cycle wreak havoc were over in the rich world. No such government today, I said, could or would tolerate any prolonged period in which the unemployment rate was kissing 10% and inflation was quiescent without doing something major about it.
I was wrong. That is precisely what is happening.
Stunning. And it should be unacceptable. When did unemployment nearing 10 percent in the official figures (and at 17.0 percent using the likely more accurate U-6 definition) become the new normal? Where is the outrage?