All the heat on the issue of AD policy overshadowed and even delegitimized discussion of policy to deal with structural issues in the labor market. Suppose the latter policies were cheaper economically and politically. In this case, while the benefits are smaller (only 1/3rd of unemployment would be addressed according to RA) the cost/benefit analysis would still come out in favor of policies addressing the structural issues.

Was the acrimony and name-calling worth it?

7 thoughts on “Question”

  1. Why not eliminate the anti-adjustment policies first? Like subsidies and other “supports” for dead industries?

  2. Also, lump sum unemployment benefits. Reduce the min wage. Coming up with ideas is what debates are for…

    If Obama was truly audacious, now would be a great time to boost the EITC and/or institute minimum incomes. This wouldn’t help the unemployment situation but it would mitigate the suffering caused by it. Alsoit explicitly deals with zero mpl workers, if they exist.

  3. Umm, according to the IMF that R.A. quotes, ~66% of the increase in structural unemployment (which in total of which is 1-1.75%) is the result of the housing bubble separate from skills mismatch. They do their analysis using an state level SMI and foreclosure rate, and personally I don’t trust state-level on the mortgage data, but whatever, the analysis stands.

    I’m about as intense as they come fighting for cramdown, second-lien writedown, community activism on foreclosures, right-to-rent, etc. etc.

    Definitely cheaper for the population; not at all politically cheaper. Good to hear that the default opinion is to drop the minimum wage though.

  4. Whoops “result of the housing bubble” I meant “result of the foreclosure crisis” which they fold with underwater crisis too (which in practice are the same places).

  5. Great its settled, a drop in the minimum wage is the default option for both sides of the debate. Let’s get that baby enacted! /snark

    But, I agree, geographic mobility is a big part of the problem and it is being driven, in large part, by too much home ownership.

    Mike, its often lost on me which of the policies you advocate are intended to deal with distributional issues and which policies are intended to deal with efficiency issues, e.g. cramdowns hurt banks while home owners gain (and therefore they hurt non-homeowners) but do they help fix the geographic mobility problem? The the distinction matters because a well-articulated efficiency argument would be heard by those on all political sides whereas there are bedrock level disagreements about redistribution.

    (Please don’t give me some BS about how these redistributional policies are necessary to boost aggregate demand and so are really just efficient policy. Here we are two, three, four years later and the world hasn’t blown up from the lack of cramdowns or whatever. And in any case, policy makers aren’t buying it. Stay relevant, talk efficiency. Talk supply-side.)

  6. Of course, given your political leanings I wouldn’t call it the “supply side”. Yglesias seems to be doing a good job talking about this stuff (e.g. occupational certification) without mentioning anything within rhetorical miles of Laffer curves.

    An interesting political counter-factual would be guess at the popularity of supply side issues, like structural unemployment, on the left if Carter won re-election and Thatcher was a Labour PM. I can’t for the life of me think why the nature of these issues make them more or less “conservative”.

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