Stimulating Jobs Growth
by Jeffrey Miron on June 25th, 2010
13 Comments
In Room for Debate at the New York Times, along with Tyler Cowen, James Galbraith, Heather Boushey, and Mark Toma.
Categories: My Blog
Bob K
Spot on with your recommendations! (as expected).
These kinds of debates provide a stark example of the partisanship that colors economic thinking, as well as the distance that economics has left to travel on its path to becoming a science.
Galbraith’s extremely odd set of recommendations – lowering the retirement age to 55, set up a government lending bank, and increase government spending – left me in a state of dismay. How can a rational mind possibly reach those conclusions?
Would that more of the electorate had a rational mind, they would see the sense behind Miron and the folly behind the bigger-government Keynesians.
-b
I just read your NY Times commentary, and I can not believe the stupidity and glaring-steal-from the-poor-to-further-the rich rhetoric you presented given our current economic situation an what caused it. Given that 1) the U.S. has already cut taxes on capital income and these cuts are currently effective and yet do nothing to ease our situation, 2) the U.S. has spent the last 30 years doing nothing but cutting corporate tax or providing increasing corporate welfare, and 3) the current minimum wage is such a farce that cutting it would have no real impact accept to expect the poorest of Americans to now bail out the situation that corrupt bankers have created for us—exactly how would these moves miraculously create the jobs you propose? Especially since everything you have proposed is already in place and have done nothing–or worse than nothing–we are in the worst economic situation since the Great Depression. Obviously you need a reminder of what caused the Great Depression: greed. I am ashamed for you.
Nina Youngstrom
Reduce the minimum wage? You might as well have said “Let them eat cake.” Lack of oversight (regulation) and accountability begets bad behavior — and now it’s ordinary Americans picking up the tab for it. And our deficit is severe partly because of tax cuts for upper-class people who don’t need them. No wonder your comments were not echoed by anyone else. Like the other commenter, I am ashamed of you and ashamed that you hold such a powerful position.
Marvin Geller
The Bush tax cuts for the wealthy is what started this mess. Along with eviscerating government agencies that we now need. By all means lets lower the tax on unearned income so Hedge Fund managers can be taxed even less on their 200 million. Wonderful idea.
Bob K
@Nina, if there is one thing that economists agree on, it is that minimum wage laws lead to higher unemployment, just as rent controls lead to housing shortages and urban growth boundaries lead to increased housing prices. This is not about ‘let them eat cake’ insensitivity, but rather is about the unintended consequences of price controls. People who are in favor of minimum wages are making a decision – based on emotion – that will actually have the *opposite* result of that intended. This is Econ 101.
Our deficit is severe because we keep increasing spending at a faster rate than the GDP of the country. The spending beast is out of control, and everyone seems to know this except for progressive-minded economists. The problem is on the spend side of the ledger, not on the income (taxation) side!
Even European countries have discovered this – see the austerity measures put in place by France, Germany, Spain, Greece, …
Jim Todd
Wow! Are you this stupid naturally or do you take pills to further disable your brain function.
Pat
In our attempts to make economics a science, the scientific method would say to give the bigger government Keynesians full control over enacting policy. At least then, they could be empirically proven wrong if their policies failed; the debate would be over. Watered down Keynesian and monetarist economics will never give us clear answers, thus we should all get used to indefinite partisan bickering.
In my opinion, Smith’s invisible hand is nothing more than the hand that takes corporate lobbyist $$$ and transfers it delicately into the backpockets of our elected officials. Big government is necessary because there are BIGGER corporations out there that think only in terms of their bottom line (as they should). This doesn’t mean that Big government should be allowed to do what it wants. We need as many checks and balances in our country as possible to keep everyone honest. The internet can now track lobbyist $$$ and help the people keep our officials in line.
On a side not, the invisible hand is soon going to be working overtime now that our Supreme Court thinks that corporations are people too. Does that mean that we get to use capital punishment on them now?
Bob K
@Pat – What you are talking about is crony capitalism, not Smith’s invisible hand. Crony capitalism thrives at the intersection of government regulation and business self-interest. More checks and balances leads to more opportunities for money to transfer from one pocket to another to get around said regulations or gain other advantages.
Pat
Greetings Bob,
The way I see Smith’s invisible hand working is that individuals and companies acting in their own self-interests will benefit society as a whole. However, look at where BP’s “self-interest” has gotten us. You’re correct to note that checks and balances can be corrupted (MMS, SEC), but we need to find a way to make the dealings of these checks and balances more available to public scrutiny. It may be too idealistic to think that special interests won’t be able to corrupt the objective and transparent checks and balances that we so desperately need, but I can dream right?
Bryan Van Namen
Too many words were used to make your point, abolish society and historical perspective would have sufficed. If only libertarians would establish their own state so they can fail themselves instead of the nation. The Northern Mariana Islands for example, oh what Jack Abrahamoff and his clan already set up camp and it failed. Except in providing for cheap, illegal labor held behind barbered wire fences with no plumbing. GO FOR IT, I hear the weather is nice.
Tax Lawyer
And here I thought the Neanderthals had become extinct. I would like to see the biologists dissect you after you are gone, to see what your gene makeup is.
Where to start. First, the problem with out economy is a bi-furcation of the wealthy and the poor, with a shrinking middle-class picking up the tab. Warren Buffett pays half of the the effective tax rate as his secretary does–his words not mine. That is neither a recipe for fairness, nor efficiency.
It is pretty clear that what we need is to speed up the acceleration of money–locking it in low-paying, supposedly low-risk Treasuries is simply removing money from the economy. Quantitative easing is doing nothing, without the traditional lending frenzy to accompany it. The only remedy left, ala Keynes and FDR, is massive deficit spending. Otherwise, tax base revenues shrink to next to nothing.
You also fail to take into consideration the very real costs of riots in the streets. We are getting closer than you think. When property-owners fear for their property and their lives, change will happen, usually for the worst. Better to throw the peasants some bread for awhile.
Kevin Adolph
I have to admit: it is amusing to see the amount of animosity your section of the debate has generated. Your sentiments are textbook (i.e: lowering taxes decreases a disincentive to hire/work/invest/produce, so lowering taxes can have a beneficial effect on the economy), yet the reactions to your article make it seem like you are preaching some heathen doctrine. My guess is that you shouldn’t have added the word “bush” to “tax cuts.”
What interests me the most, however, are sentiments like these:
“The basic problem is the enormous gap between the very rich and everyone else which has been growing steadily every since Presidents Reagan and Bush managed to pass the kinds of tax cuts that Mr. Miron advocates. As a result, the middle class has lost most of its buying power”
Liberals think that rich people are only rich because they ‘game the system,’ or ’steal from the middle class.’
In reality, rich people get richer by providing goods and services that people value more than the dollars they spend. By engaging in voluntary transactions, wealthy individuals are making themselves AND other people better off.
That is to say, economics is a POSITIVE sum, and not a ZERO sum game. Statements like: ‘The rich are richer, which means the poor are poorer’ are complete non-sequiturs. If anything, the opposite is true: the rich get richer by making contributions to the economy that are valuable enough that people are willing to pay them.
Of course, there are individuals who made their money by stealing (madoff, who was eventually brought to justice). But they are the minority. The overwhelming, vast majority of rich people make there money in a way that is just and fair.
Encouraging the successful to continue adding to the economy is a no brainer.
Bill
Right on Jeffery,
It amazes me what a sour view liberals tend to have of their fellow man:
Self interested and greedy – unable to control his own actions – in need of a paternalistic government to watch over him.
They are, of course projecting their own feelings of themselves onto others.
If we are greedy, according to them, then we must have a government to watch over us as save us from our misdeeds.
One of the problems with this as that when our government intrudes into our lives and attempts to “fix” things it almost always does a poor job as the “fix” seems to go against human nature.
That human nature is one of striving to better ourselves and in doing so others benefit.
Sure, we all agree that our government should regulate to some degree and punish those that we have in trusted when they abuse their power.
I actually believe we are to lenient with some of the Wall Street criminals and others.
There punishment should be harsh enough to send a very strong symbol.
This being said, when we distort, for instance, the market hourly wage for a worker by demanding that business owners pay them all a minimum wage then some business owners will not hire workers who are less productive whom they would like to hire but for a smaller hourly wage.
This denies workers the right to entry level jobs as business owners will not hire them.
There is a whole group of individuals out there right now who would gladly step into those lower wage jobs if at least to gain some job experience which could allow them to become more productive and thus earn even a higher future wage.
The amount of the minimum wage is an arbitrary number not based on any sound economics.
The market place for labor is complicated and always adjusting to forces – it is dynamic, but for the government to step in and force it’s hand always ends in disaster.
How many examples do we need?
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