How I’d Fix Unemployment

August 2nd, 2011 at 8:31 am David Frum | 87 Comments |

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We’re introducing a new occasional feature today, “Easy for Me to Say,” in which readers are invited to pose questions that more or less take the form: “OK – so what would you do instead of this or that politician you’ve criticized?” (Readers who want to ask questions should email them to editor[at] with “Easy for Me to Say” as the subject line.)

Today’s question comes from a reader in California who asks, “What would you do instead to create jobs?”

It’s obviously a big topic, but here’s the policy mix I’d recommend. No special marks for ingenuity here: all these measures are time-tested responses to economic downturns:

1) Cheap money, a low dollar, and moderate inflation.

2) Tax relief aimed at stimulating private consumption, such as a big payroll tax holiday.

3) Income support for people in need.

4) Modest and temporary subsidies to state building projects.

5) An immigration moratorium.

6) Agreement now on a plan to balance federal budget to begin only after such time as unemployment declines below 8% or the 10-year US Treasury bond goes north of 5%.

Most of this program is fairly obvious and intuitive, but a couple of side notes:

A) I don’t worry very much about monetary ease generating under current conditions.  Two prior rounds of quantitative easing did not produce inflation. Anyway, a moderate inflation (3-4% – the level that prevailed through most of the 1980s) would be a good thing: it would help reduce the burden of debt on US households.

Excess household debt was the ultimate cause of this economic crisis. Excess debt delays recovery because households are using any cash that comes their way to pay down debt rather than support consumption. A mild inflation would accelerate debt reduction and advance the day when households regained the confidence to spend.

B) I’d like to see the employee-side payroll tax reduced to 0% for the duration of the crisis: a visible pay increase for every worker. Some workers will spend the money. Others will repay debt – hastening the day when they can resume spending.

C) You hear it often said that the US must create X number of jobs per month simply to stay even with the increase in the working population. It’s not stressed often enough that much of this increase is artificially created by immigration. In a time of high unemployment, why make the challenge larger?

D) Government infrastructure programs have a long-established record of failure as counter-cyclical job creators. They come online too slow, and they are usually organized in ways aimed at maximizing the incomes of established workers rather than creating opportunities for more. That said, if workable projects have been planned and costed, now is the right time to execute them.

E) Now is not the time to be cutting support to the unemployed. I’d think that should be obvious.

F) Cut government spending and increase government revenues in good times, not bad. You don’t have to hold with all this new-fangled Keynesian economics to appreciate that one core lesson. No need to panic now that under some imaginary hypothetical future circumstance, lenders will hesitate to buy US paper. They’re buying today. We don’t have so few problems today that we need to commence worrying early about problems that may arise later.

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87 Comments so far ↓

  • kuri3460

    Most Republicans would only support #5, and not on economic grounds.

    • Graychin

      Absolutely true. Their idea of a jobs program is a lower marginal tax rate for “job creators” – especially hedge fund managers, who create tons of jobs.

    • Rob_654

      Exactly – most Republicans appear to not understand that the more money the lower and middle income people have to spend the higher demand goes and businesses will respond by producing more goods (regardless of tax rates) or they will find new competitors who will meet the consumer demand.

      While both sides are always in a political fight, the Republicans have gone to the crazy side with their beliefs in how to get the economy going.

      • Mallarde

        The best way to get money in the hands of middle/lower class people is to hire them to do work. We seem intent on hiring illegal aliens for work in California. Only highly skilled jobs go to native workers. This simply must end for the calamitous situation to improve.

    • Another Matt

      I’m not convinced it even makes economic sense, especially not for the reasons Frum mentioned. You want population growth with a broader base of young people (especially when fiscal constraints are exacerbated by demographics), and a good way to do that is immigration. There might be a point at which there just aren’t enough jobs to go around and that might be now, but I’m not sure I see how immigration hurts in a demand crisis.

    • Ripcord Jones

      Yeah, I hear that those Canadians are taking all of our lucrative pundit jobs, eh?

  • sinz54

    The real reason for lack of demand in this economy is the huge debt overhang.

    You’ve got 23% (!!!) of homeowners who are upside-down on their mortgages, owing more on their mortgages than their homes are worth. Many have filed for bankruptcy. These folks, even if they are still employed, aren’t going to be buying any more big-ticket items on credit. (Try getting an auto loan right after you filed for bankruptcy.)

    This is one time where progressives and I are on the same page: Some kind of debt relief program is desperately needed.

    Obama had the right idea with his Home Affordable Modification Program (HAMP). But so far it’s been a flop; few homeowners have taken advantage of it. The reason is that the banks have not agreed to major principal write-downs. Without that, the homeowner is still screwed.

    A program to reduce principal to the point where the homeowner is no longer upside-down on his mortgage could get his credit rating restored, and the confidence to buy stuff again.

    A 15% or 20% reduction of principal wouldn’t hurt the banks that much.

    Now a 15% or 20% reduction of principal won’t work in places like Detroit, where housing prices have fallen by an average of 50%, or in Nevada, where housing prices have fallen an average of 30%.

    It’s really time to facilitate relocating people out of those areas. The moving expense deductions on the Federal income tax are archaic. The limit on those deductions hasn’t been raised, AFAIK, since I was in college. Meaning that inflation has made that limit triply draconian.

    I would create a moving expense tax credit (NOT a deduction), to facilitate moving people from distressed areas to thriving areas. If you need to move your family to another state to take a new job there, then you get to do it for free: The movers, staying in a hotel as long as needed till you find your new home, and even your closing costs on your new home would be reimbursed by your tax refund–in full.

    What about the homeowner’s inability to sell his house in order to move elsewhere? I might seriously consider having the Government buy his house at a price that isn’t quite enough to pay off the mortgage. That way, the homeowner still has skin in the game. Once the homeowner and his family have moved out of there, I would have the home demolished, taking it off the market. Reducing the supply of homes would get the supply into balance with demand.

    What about moral hazard? Well, that ship sailed when Bush and Obama bailed out Wall Street for their incompetence and (in some cases) fraud, and Obama bailed out General Motors for being incapable of producing a car that’s anywhere near as good as a Honda. Besides, homeowners have been so burned by this economy that I very much doubt they would use my proposals as a license to go wild and go into unsustainable debt again.

    • kuri3460

      While the likelihood of anything like that ever passing through Congress is right up there with Rand Paul becoming the EPA’s most fervent supporter, I do think you’re zeroing in on the main problem here.

      This crisis was emboldened by a housing market that was so far out of touch with reality that, in hindsight, one would have thought that it could only exist in some far-off parallel universe. The problem now is that even though we know those numbers always were 100% artificial, they are on the books and we have to contend with them. More troubling is that our perception of what a “good” economy looks like is largely based on our memory of a time when the bubble that led to this recession had yet to burst, and so there is going to be a disconnect for probably at least the next decade between how economists measure recovery and growth and how ordinary citizens measure it (and that’s before we consider the effects that political talking heads have on the process).

      There is no easy answer. A large-scale reduction of principle might look good on paper, but I think the unintended consequences which would likely ensue could possibly be much worse than the actual problem we’re trying to solve. This recession is about morale as much as anything else, and when the news is constantly bad, I think people who are on the fence financially are slightly less inclined to stay the course. Morale is a tough thing to fix, especially when the government is trying to do it, but if our politicians can find something that generates a little bit of good news – whether it’s a noticeable tax holiday for working Americans, or some thing else – that might be the best thing they can do for the economy.

    • Primrose

      The problem with your home buying program is that people who are moving to another job still need somewhere to live. When my husband accepted a new job across the country and then the housing market crashed, we needed more money because the new area was exorbitantly more. The crash just meant I could think about buying a house after I saw it. Rents were impossible and not really available anywhere with good schools or suitable for children.

      Luckily, for us after two years of selling our house and failing the company let my husband work from home as he had been doing.

      While I like your moving expenses idea, you have to have the money to pay for it and if costs 25 K and up (as it easily could we discovered, even with the company paying some) how are you going to float that until tax day?

  • Solo4114

    Nice feature. I can’t say I fully agree with every point listed (at least not without greater detail and, in some cases, legal analysis), but it’s nice to at least see a coherent discussion on this type of thing instead of ranting and finger-pointing (not that that’s been a staple of FF contributors, that is).

  • Another Matt

    My eyes wandered to the line in the piece which says, “now is the right time to execute them,” and my addled brain assumed the worst. =o(

  • Banty

    Love the idea, love this list (such smarts and knowledge is incompatible with the AEI), but I’d quibble with the following:

    “Excess household debt was the ultimate cause of this economic crisis.”

    Well, this might depend on the word ‘ultimate’, but, although certainly things were tending out of whack for household debt for some time, the crisis only took off due to certain mortgage practices, and was found to be uncontainable once CDO/CDS liabilities was uncovered.

  • Smargalicious

    Until we recover from the greed period (1998-2006) of the housing bubble, ain’t nothin’ gonna work. All the folks who grabbed and flipped are upside down and still walking away from their mortgages. Probably another 5 years and we’ll be back on track.

  • sunroof

    Not sure at all on an immigration moratorium. Here’s why.

    The US, like other countries with the Baby Boom population bulge, face waves of retirements of skilled workers and specialist technicians.

    It also needs qualified candidates to fill vacancies in fast growing industries; retraining the unemployed is not always the answer for these vacancies. America also needs the best teachers for its universities.

    Finally, a growing population needs housing, and the faster it grows, the faster the housing surplus will be reduced, thereby spurring a revival of the construction industry (and construction employment). And an immigration policy skewed towards young workers – as opposed to family reunification where parents or grandparents tend to be brought over by younger, naturalized citizens, will increase the base needed to carry our social programs until the Baby Boom burden is reduced by 2035.

    • overshoot

      [quote]America also needs the best teachers for its universities.[/quote]

      There are very few faculty job openings compared to the number of PhD graduates as it is. Add the lack of funding for graduate students and it’s hard to justify economically.

      American students (and they’re the ones doing the teaching, remember) by and large have better things to do with five years out of their 20s.

      • Steve D

        There’s nothing wrong with our technical manpower situation that can’t be fixed with:
        1. Real rewards. High salary is a help – cut the salaries of the lawyers and marketers by 50% and give it to the techs – but in a world where all good things are “rights,” what’s the incentive to excel? We could start by treating experts as if they have something useful to say instead of putting quotation marks around “expert.”
        2. Job security. Thanks for creating the Space Shuttle, now good luck finding another job. We need your salary to pay a couple of sub-clerks in the Ministry of Silly Walks.
        3. Freedom from bureaucratic nonsense. Time sheets and personnel reviews would be a good place to start. See Dilbert for ideas.

  • overshoot

    This is a very disturbing post. What’s disturbing about it is that it could just as readily have been written by Paul Krugman or Brad DeLong.

    • foosion

      Articulating reasons why a proposal is good or bad is better than ad hominem attack.

      • overshoot

        Please don’t misunderstand me — I’m not commenting on the substance because I really don’t have any problems with it. It’s just a bit disorienting to see Frum, DeLong, and Krugman in so much agreement.

        • foosion


          His proposal is highly mainstream. Just about any economist not in the pay of an ideology agrees. Alas, congress has moved far from mainstream economics, as well as the desires of the median voter (even the median R voter).

        • JimBob

          It’s not surprising. Frum isn’t a conservative. I don’t think he ever has been one. One thing for certain, he is an economic illiterate.

        • Anonne

          They say reality has a liberal bias. Frum is basing his opinions on evidence. That it means he agrees with many of the basic positions of Paul Krugman and Brad DeLong should say something, but it’s lost on people who believe in the junk economics that Wall Street & the Koch Brothers have sold people into believing.

  • foosion

    1) Cheap money, a low dollar, and moderate inflation.
    ==> The after inflation cost of treasury borrowing for 5 years is -0.9%. The bond market is willing to pay us to take their money.

    2) Tax relief aimed at stimulating private consumption, such as a big payroll tax holiday.
    ==> make up funds from general revenue, else this hurts Social Security

    3) Income support for people in need.
    ==> Yes

    4) Modest and temporary subsidies to state building projects.
    ==> General state revenue sharing, so that state contraction does not make things worse.

    5) An immigration moratorium.
    ==> Very arguable, but politically appealing

    6) Agreement now on a plan to balance federal budget to begin only after such time as unemployment declines below 8% or the 10-year US Treasury bond goes north of 5%.
    ==> 8% is still very high

  • Unsympathetic

    “Two prior rounds of quantitative easing did not produce inflation” – Yes, David, because QE is just the bailout of banks. TARP was nothing but the bridge loan to “tide them over” until the real bailout could get funnelled to them.. and to disguise the bailout from normal Americans. If you want to disagree with this, all you have to do is look for one of several stories describing how TARP was repaid with loans from Treasury.

    8% is far too high, David — every economic theory quoted by Republicans utilizing private market investment requires full employment as the initial assumption before any statement actually becomes true. Thus, you’re using employment economic theory at a time of extremely low employment. Remember, businesses don’t hire until their margins per widget sold are increasing.

  • Frumplestiltskin

    yeah, nice piece but it doesn’t address stagnant wages for the Middle class, simply generating more minimum wage jobs might be better than no jobs at all but won’t get us back on track unless we have substantial government assistance programs we will not see the pie grow, how can you have a consumer society when most people are nothing more than the working poor?

  • Primrose

    I like the piece overall Mr. Frum. I think farmers will still need fruit pickers though.

    But I also think part of our problem is that companies need an attitude adjustment. I recently read an article in which companies won’t hire people who are unemployed– to the point where they are even putting unemployed need not apply into ads.

    I know from my husband’s job search five years ago that they will only hire people to do a job who have been doing the exact job several years and promotion from within is so rare that his HR department recently gave a company wide talk of building a career by lateral moves only.

    If you do manage to move up to a decent income, and gain experience, you become dispensable, too expensive. The mother of one of my son’s friends is a teacher with 20 years experience. She can only substitute or adjunct because she’s “too expensive.” Corporate employees over 52 understand this problem all too well.

    Add to that Baby Boomers who won’t or can’t retire. My father-in-law recently talked an 80 year old draftsman into retiring so one of the two young drafts people in their job could move up.

    Corporations have failed to understand that they are part of a larger community. If all you do is take, take, take, eventually there will be nothing left to take. It’s ecology 101. Yes, you can move but you will face the same problem there.

    If companies would give up these stale ideas of theirs, and start believing in their employees, and American’s in general, both our country and our economy would be in a much better place.

    • Banty

      +1, Primrose. Not sure how to implement it, though.

    • overshoot

      [quote]Add to that Baby Boomers who won’t or can’t retire.[/quote]

      One proposal is to adjust the SS and Medicare eligibility ages based on unemployment (among other things.) Basically, as long as we’re paying people unemployment we might as well make room for people at the beginnings of their careers instead of at the end.

      The ugly is in the “based on” because you absolutely do NOT want to remove people permanently from the labor market thanks to a short term blip that the Fed uses to knock back inflation.

    • Mallarde

      “I think farmers will still need fruit pickers though.”

      Maybe we could substitute our slaves… er, I mean our unlawful but welcome and honorable guests from El Sur… with machines. You know, like how we have cotton gins. Maybe fruit picking technology can improve. We can blast a droid to Mars and have it skate around and bunsen burn Martian rocks. Surely, someone can develop fruit picking machines… Oh, wait, they already have.

  • GrandBargainHunter

    Having read this outrageously sensible post, I don’t see how DF and his FF ilk could possibly support any of the Republican candidates for president in 2012. I think David’s admirable efforts to get the Republican Party to see reason (rather than visions of ennobling, God-ordained Gilded Age wealth against a backdrop of Dickensian suffering) is about as futile as Luther trying to reform the Catholic Church from within.

    • PatrickQuint

      In the long term, about half of the voting population is going to vote Republican because The Great Unwashed aren’t very interested in politics. A lot of people see the ballot box as a referendum on the party in power, or a referendum on the state of the government. This alone tells you that there will be two parties in this system for the near-term and mid-term future in the least.

      If all sane people flee one party, the other won’t start losing… it”ll simply be run by the insane. The political thrashing that some of you hope to see, with deep blue out to the political horizons, is not going to happen regardless of the policy positions of red *or* blue. David Frum has been predicting a time of political exile for Republicans, a time that has not materialized. The idea that craziness doesn’t disqualify is disturbing, but look around at the electoral successes of the crazy party and tell me that Republicans are doomed.

      Rush Limbaugh and company are ideologically flexible (re: oppose Obama, regardless of policy). I suspect that they would support any President with an “R” beside their name as fervently as they oppose a President with a “D” beside their name. This implies that electing a sheep in wolf’s clothing like Romney would be a death knell to the Tea Party in its 2010-2011 incarnation, because the media outlets that have been feeding them will be singing a new tune.

      Considering how far right Obama looks from where I sit, I suspect that there’s actually little daylight between him and Romney on issues of policy. This is despite Romney’s public statements (if I trust anything about that man, it’s that he’s fibbing a lot right now). If you stamp an “R” on Obama then you might actually be able to get something done (unfortunate as that situation may be).

  • John Frodo

    I have a solution that fixes, unemployment, global warming, the deficit and trade imbalance, and its fully funded.

    • Steve D

      And when our Strategic Petroleum Reserve is gone, then what?

      Why don’t we just find more money? After all, folks like you seem to think we can find oil indefinitely. So why not money?

      • John Frodo

        Its a buggy whip obsolete, if there is a hydrogen based economy with hydrogen created in America, the SPR is redundant.

  • beleg

    1) The first two have been tried, and the third only helps if middle class take home pay moves with it. That hasn’t happened in what, 15 years?

    2) Are you proposing more than is already out there? We’ve already done a major payroll tax deduction, and the Bush tax cuts have already been extended once. How much more are we talking?

    3) Like extending unemployment insurance? Again, what are we talking about that hasn’t already been done?

    4) Do you think modest and temporary stimulus is going to have any more impact than the last round? It helped, sure, but it was a drop in the bucket. I don’t see any reason to think this wouldn’t be more of the same, helping individuals without reversing the economic trend.

    5) Interesting idea. Very confrontational. It’s basically flipping off the rest of the world, and people within our country from abroad. I’d like to hear someone talk about what the international reaction would be before I seriously considered it. I’m also skeptical that the result would be significantly helpful.

    6) Reasonable, but helps only in that we won’t make things worse before they get better.

    Basically, I don’t see anything so divergent from what’s already been done that it would make a difference. You’re suggesting more of the same, plus one major change that would insult a lot of people, for likely modest returns. You’re right that these are all simple fundamentals that every economist should agree to, and that’s why it’s mostly been tried already. But they’re all modest efforts, you’re trying to pay off a massive debt with nickles and dimes. It might help in the long run, but you’re not proposing anything likely to make a noticeable difference in the near future.

  • TAZ

    If I had to pick one idea it would have to be “B”.

    An employee-side payroll tax reduced to 0% paid for by either closing corporate loopholes or cutting the Bush tax cuts that go to people over $1M.

    I would call it something like the “Give Back to America Act”, or something equally flag draping.

  • LauraNo

    I think I’ve read that immigration (the illegal kind) is virtually zero at present but I have no clue about the legal kind. Does anyone know if those numbers are down?

    • PatrickQuint

      Immigration is capped at 250,000~ish per year, taken from a waiting list.

      I don’t know what’s happened to the size of the waiting list, which would be an indicator of how appealing the country is.

  • Raskolnik

    D) Government infrastructure programs have a long-established record of failure as counter-cyclical job creators. They come online too slow, and they are usually organized in ways aimed at maximizing the incomes of established workers rather than creating opportunities for more. That said, if workable projects have been planned and costed, now is the right time to execute them

    This is true. However, it is also true that repairs to existing roads cost less money and are more effective in the short term as a “stimulus” than new roads. Meanwhile, our bridges are dangerously in need of maintenance, and about 1/3 are either structurally deficient or functionally obsolete–meaning they will need to be replaced. This might not be the time for big public works projects like the Hoover Dam, but roads and bridges are a no-brainer, especially once the costs of bridge failure (like what we saw in Minnesota a few years back) are taken into account.

    There is also the argument to be made that we can and should invest in our infrastructure, not for counter-cyclical reasons but because there is a legitimate need for new infrastructure, perhaps even a big public works project like the Hoover Dam. However, it may be more prudent to wait until our economy is humming again, especially given the resistance any such proposal would meet in the House. Personally, however, I am in favor of developing our nuclear power generation capabilities in order to phase out petrocarbon energy ASAP.

    • overshoot

      [quote]There is also the argument to be made that we can and should invest in our infrastructure, not for counter-cyclical reasons but because there is a legitimate need for new infrastructure, perhaps even a big public works project like the Hoover Dam. However, it may be more prudent to wait until our economy is humming again[/quote]

      In other words, put off needed maintenance while it’s cheap and wait till the cost goes up?

  • JimBob

    Wal-Mart CEO Bill Simon expects inflation

    Texas Roadhouse Narrows Earnings Guidance Given Higher Inflation

    Rest assured when average Americans grocery shop or fill up their cars they feel the inflation.

    • kuri3460

      Jimbob, you know that fluctuations in oil prices have much less to do with inflation than they do a variety of global geopolitical factors.

      You also know that just because one item increases in price doesn’t mean the entire economy is swallowed up in inflation. Food prices are up, but over the past few years, housing prices and insurance rates are down.

      • JimBob

        The dollar is the reserve currency. Oil is traded in dollars. When Helicopter Ben Bernanke floods the world with cheap dollars the price of oil is going up. With the Euro floundering money has flowed into the dollar which has helped drive the price of oil down a little. But make no mistake, Bernanke is just trying to reinflate the bubble. Another asset bubble. Money is rushing into commodities which drives up inflation.

    • overshoot

      JimBob, we’ve had headline predictions of pretty much every month since 2008.

      What makes this one different?

  • armstp

    The picture was before the hair plugs?

  • armstp

    Almost all of these recommendations may help in the medium to long-term, but there is nothing here to create jobs in the next year. Even the infrastructure projects are notorious for taking a long time to get up and running.

    The problem is demand. How are you going to stimulate demand? To answer that question you have to ask why demand is not there or higher?

    Housing prices? maybe. Lower incomes and just being unemployed? maybe.

    The truth is failing any large fiscal stimulus package (which is politically off the table) there is probably not a lot the government can do. It will just take time for the growth in the economy to build and jobs to be added.

    We can only invest in education, job re-training, innovation, etc.

  • TerryF98

    Dow down, unemployment to go up 1.8 million because of debt ceiling hostage deal.

    How’s that austerity working out for you teatards?

  • samgilbert

    #5 is misguided, it assumes there’s only a fixed number of jobs out there and that immigration wouldn’t spur job creation (not to mention help our Social Security and Medicare problems). We could probably do without the kind of immigration we have been getting (the low skilled illegal kind), but we should actively be pursuing immigrants with means and education. We should start by letting any foreign students who get a degree in the U.S. stay and become citizens.

    • Mallarde

      Why because our own graduates need more competition? Because foreign graduate students have so many millions of dollars in their bank accounts that they are just killing themselves to hire 50 Americans to launch a new tech company? Because salaries in the tech industry for engineers is just too high and must be depressed more by foreign labor?

      It sounds like you are just repeating what you have heard without actually analyzing the facts. The labor market in tech is so bleak that few Americans will go into computer science.

  • Around the Horn: 8.2.11 | Demablogue

    [...] David Frum on what he would do to fix unemployment [Frum Forum] [...]

  • adamcarralejo

    “We don’t have so few problems today that we need to commence worrying early about problems that may arise later.”

    This statement pretty much summarized my disgust with the Republican party.

  • NRA Liberal

    Here’s what I’d like Frum to explain:

    Is there any daylight between your views and those of the right end of the Democratic Party?

    • Solo4114

      I would argue that there is some, but it really depends on the issue.

      I know a lot of folks here keep saying “David, when are you gonna admit you’re a Dem?!” on both sides of the aisle. But honestly, I think that question, coupled with his insistence that he’s a Republican, highlights the real problems with the political parties these days. The Dems are SUCH a “big tent” party that they effectively have swallowed the entire center and are eying parts of the right for desert. The GOP, on the other hand, has been shoved into a very narrow bandwidth defined by otherwise unrelated single issues. It’s got a whole mess of planks, and no real coherent platform anymore. Or at least not one it can call its own.

      I think in an ideal situation, you’d have reasonable members in both parties occupying [left/right]-of-center positions who can compromise, people closer to the wings who are willing to accept that the Stones were right and you can’t always get what you want (and then who would govern accordingly), and the inevitable fringe loonies who would hopefully be locked away in their parties’ respective attics. (Note: these days I STRONGLY differentiate between left-wing loonies — who by and large are a dying breed — and right wing loonies — who happen to actually constitute a significant portion of the GOP’s House and Senate caucuses. I’m just saying I can envision a world where you get bomb throwers on both sides even if that’s not really the case these days.)

      Really, though, I think we’re living through a period of political redefinition for the parties. What made you a “Democrat” or a “Republican” in the past doesn’t necessarily track to the present nor define the future. You can look at the difference between “New Deal” (and “Great Society” which, really, strikes me more as “New Deal 2″) and Clinton-era Democrats, for example. That’s a shift in and of itself. Same goes for the “Reagan Republicans” and the GWB Republicans.

      There’s continuity through all of this, but there are also shifts, both subtle and not-so-subtle. I think we’re headed towards a general realignment of the specific “planks” that make up the platforms of each party. For example, pro-environment evangelical Christians. To which party ought they belong? What about people who are socially liberal but who think that Social Security reform is necessary…and should be means-tested while the taxes that support it are kept at more than just “maintenance” levels, even if they’re lowered from current rates? Are they Democrats? Republicans? What? Those are the kinds of issues I think we’ll be facing, and the old divisions may not necessarily track along the same old lines.

      • drdredel

        Really well said. I’d only add that another major difference between extreme viewpoints and “moderate” ones is that extreme viewpoints naively believe that there are simple solutions to complex problems. The solutions David suggests are all plausible and viable, but none of them would get 4% of the population back to work tomorrow. So, if he were running for office, he would lose because that’s the kind of solution many are waiting for.

        • Mallarde

          Incorrect. An immigration moratorium would immediately improve the labor market (for laborers — not employers) in a significant way. Currently, legal and illegal immigration together with work visas decimate the labor market for everyone but highly skilled U.S. workers. (Most of the readers of this site probably have no idea.)

    • Banty

      Well, speaking as an ex-Republican now voting for anything breathing and blue, the “right end of the Democratic party” is only where it is, because of the breathtaking rightward shift the Republican party has taken. Those of us who think independently of labels, stay where we are (generally), and, bingo!, we’re in the “right end of the Democratic party”.

      • indy

        Exactly so. I don’t think I’ve moved at all on the political spectrum really, but then I don’t think in terms of labels (for myself or other people) or attempt to pigeonhole people into camps so I can conveniently paint them with a broad brush.

  • sublime33

    One other thing that adds to the unemployment rate is the delayed retirement age of workers 60 – 68 years old. Reduced pensions and lack of access to affordable health care causes workers to hold on to their jobs longer than they used to. Once “Obamacare” goes into effect, expect more older workers to retire in a more normal timeframe.

  • jeremyh

    So given how politicians operate, these are exactly the things the Republican Party should be careful NOT to do until after the 2012 elections, right? (I’m not saying the Dems would do any different). Are you listing these as advice to Republican Presidential candidates? Otherwise I don’t see the point in mentioning them now (although I’m glad you are – I think President Obama would probably agree to the list of them).

  • overshoot

    Seriously, I would suggest a sixth:

    Aid to states.

    Right now, increases in private-sector employment are being cancelled out by public-sector layoffs. As someone said two years ago, there’s nothing so “shovel-ready” as a teacher with a pink slip.

  • Rob_654

    But when arguing with the Far Right and Tea Party these are folks who when in an airplane that has lost speed and starts nosediving will scream to hit the “brakes” instead of pushing the engines to their max to regain speed in order to pull out of the dive.

  • jerryparks

    I would lower marginal tax rates. According to Ayn Rand or Eric Cantor, I can never tell them apart, each 1% lowering of capital gains taxes for those earning over $250000 employs 140 million people, mostly as butlers and chauffeurs, but still….

    • Banty

      No, silly Jerry, all the people will up and found railroads, for each penny less tax, we’ll get another Dagny-run railroad.

  • Bill

    The US economy was not healthy before the financial crunch in 2008 and the current economic problems. Cheap credit fueled the housing construction boom and supported the consumer driven economy (which purchased imported goods). It also enabled governments to increase government spending while keeping taxpayers happen with lower taxes, the gap being funded by cheap debt. What has changed 3 years after the bubble burst? Not much. The government has kept things afloat by stimulus spending and added to the debt burden.

    Why would you expect employment to increase? In other recessions caused by over supply you just had to wait it out until things were back in balance and the economy resumed its growth trajectory and governments could smooth out the recession with increased spending. Until the US figures out how to produce goods or services that other economies want to purchase, I really don’t see how the situation will improve. It is not realistic to expect that 300 million people will be supported by the knowledge based economy.

    • Raskolnik

      It is not realistic to expect that 300 million people will be supported by the knowledge based economy

      Not if they are all uneducated creationists! Again, this speaks to the need for comprehensive education reform. There is no reason the United States cannot “figure out how to produce goods or services that other economies want to purchase,” but doing so will require significant investments in education at all levels, as well as R&D. This is one of the reasons why I am so opposed to cuts in the Department of Energy, their funding is miniscule compared to other Cabinet departments (to say nothing of the military) and has an outsize effect on future private-sector developments in every area of the economy.

      • Bill

        Actually, part of the problem is not “uneducated creationists” but educated liberal arts graduates (who else is responsible for the $1 trillion in student loans?) who gravitate to government or other publicly funded pursuits. In any event, there are some individuals who are “not suited” to academics and they used to have well paying union jobs making things. Those jobs have moved elsewhere (partly because of the well paying union jobs) but the unemployed and their expectations of the same standard of living remain.

  • LFC

    OFF TOPIC: Hey, David. Any chance you’ll cover the fact that Binyamin Netanyahu has just abandoned Israel, just like he accused Obama of doing just a few months ago?

  • SteveThompson

    Here is a quote from the Federal Reserve about America’s job market:

    “…it is not immediately clear how monetary or fiscal policies might alleviate the problem.”

    If the Fed can’t figure out the solution to the problem that their monetary policies have created, who can?

    Here is the rest of what the Fed had to say about the jobless situation in the United States:

  • DamnedLiberal

    “It’s not stressed often enough that much of this increase is artificially created by immigration.”

    How much?

  • Mark Thomson

    1) Cheap money, a low dollar, and moderate inflation.

    It would contribute more to the debate over jobs policy if you were to call this what it actually is: let’s confiscate wealth from those who hold cash and bonds and redistribute it to those with debt.

  • Argy F

    It is staggering to me that anyone would propose that as a society – we should encourage our government to do nothing and just let things “sort themselves out”. To lack knowledge & foresight oneself- is a a natural condition for most men, to ENCOURAGE a lack of action in everyone else is tragic and cruel.

    I 2nd Overshoot’s 6th proposal on aid to the states.

    Personally, I’d also suggest (as long term job stimulation) a 7th item.

    Start the process of uncoupling health care costs from employment.
    How can an American company compete in a global market when they have this colossal burden which creates a huge disincentive to add employees? Single Payer, Privately obtained & publicly subsidized, whatever – anything would be better than saddling companies with this burden which in turn may eventually make hiring any new employee a near impossible task.

  • valkayec

    Many of the problems that exist I believe are the result of structural problems within the economy…and even government. This problem were experiencing has been growing for 30 years or more. Time for some new ideas. I don’t know what they all are, but we have to let our creativity loose.

    As for recommendations, start with

    1- revise the tax code to eliminate many of the tax expenditures and use it to encourage the behavior & investments we generally want – increased manufacturing in the US rather than outsourcing for example rather than sustaining old legacy industries that are highly profitable

    2- revise the unemployment insurance, a la Germany, to keep people working even part time and requiring skills training attendance

    3- figure out a way to encourage & reward companies to think about all their stakeholders rather than just their shareholders – perhaps through a credit in the the tax code

    4- create an infrastructure bank that partners private money with public money and encourage participation in the type of PPPs that have been successful

    5- how about using a similar model to the Savings & Home Loan Resolution Trust to buy up homes at negotiated prices (bank & mortgage companies would take a hit to their balance sheets) to rent them on a lease to buy basis. With rents skyrocketing, leasing these homes on a lease to buy basis would help get them off the market and provide reasonable or low rents – even expanding the authority and funding of FHA, that department could handle these lease to buy situations

    6- Temporarily lower the retirement age for Social Security to ~58 with benefits matching early retirees of 62 or increase the benefit of all people who retire before 65 or 66 but after age 58 to full retirement age benefits to encourage older workers to leave the job force for younger workers

    7- Completely overhaul the medical care system including Medicare and Medicaid, a la Germany or Switzerland (I’m being realistic about what’s possible in our “free market” society), to reduce health care and insurance costs to businesses and making shifting the full cost of premiums to people while at the same time reducing costs of actual medical care overall – this will allow workers to leave their jobs for new to start new businesses and enable businesses to increase salaries to compensate for ending the growing costs of health insurance

    8- allow homeowners to refinance thru FHA, Fannie and Freddie at slightly higher rates but without having to front the entire difference between the existing mortgage and the lower value – the slightly higher interest rate over time will more than make up for not having the thousands of dollars currently needed upfront to refinance homes that have seen their values decease

    9 – I agree with Sinz that we need to make it easier for people to move for a new job – so one step could be have FHA take over the house after a certain amount of time and resell it on a lease to buy method or regular sale, with more priority given to those who already have a job offer elsewhere – the payout to the current owner would be at the lower price and the remaining principle would be forgiven without a loss of credit rating

    10 – offer low interest loans, similar to college loans, that help people finance moves for a job with a one year forbearance on repayment to allow the families or people to settle in and get established

    11- increase funding for AARPA-E, DARPA, and NIH so they can give grants for new research – with a rider that any new technology, process, etc. that hits the market these departments receive receive a percentage of profits each year until funding is repaid to create more funding for more research

    12- reform government by collapsing the number of departments into more comprehensive departments (i.e., Homeland Security would take over DOD, FBI, CIA, NSA, etc) , eliminating many managerial/admin functions while at the same time increasing the number of workers who interface daily with the public

    13 – bring every worker into the social security and the same health care system, phasing out the many different systems nationally and federally to reduce the cost of so many programs and free up money for other programs

    14 – revise trade policies to be more like Germany’s – for every container coming in an equal container must be bought going out; no free lunch – you want to import a $1 million in goods, you have to buy a $1 million in exported goods.

    Those are just a few ideas off the top of my head to change the dynamics of the situation we’re in. What angers me is if I can think of 14 ideas just off the top of my head, why can’t DC? I don’t know if these ideas will work or even what the problems with them would be, but it’s obvious we have to start thinking creatively – out of the box – to change the dynamics of our economy which has been in a gradual, albeit bumpy, slide downward for more than 30 years. The same old – same old ain’t working anymore.

    • Traveler


      Nice list for off the top of your head. Plus really agree about health coverage should not be tied to your employer. Being self employed for the better part of the last 25 years emphasizes how unfair and distorting that is.

      But number 14 perplexes me. How does Germany get away with that without violating WTO rules? JG should love it.

  • baw1064

    Regarding Frum’s #5, (limiting immigration), doesn’t the experience of Japan argue strongly against this? No immigration, no economic growth either.

  • baw1064

    My ideas:

    1) Quit making employers be responsible for employees’ health insurance (I agree with Valkayek’s 9:25 pm post above). That’s not their job (unless the employer is a health insurance company). We shouldn’t preserve the link between employment and insurance–it’s a structural disaster. Single payer if you can, a regulated insurance (Germany/Switzerland) if not. Literally, anything would be better. Yes, it’s several bridges too far politically…but we will keep suffering the consequences as long as we continue to let this fester.

    2) Quit subsidizing housing. The mortgage tax deduction should be phased out, over a period of say 10 years. And Fannie and Freddy need to be sold off in pieces. This will undoubtedly hurt in the short run, but IMO it’s necessary in the long run.

    3) In the short term, I would prefer a payroll tax holiday on the employer side than on the employee side. You want it to be easier to hire somebody. Sure, I’d like more net pay, too–but that’s small potatoes compared to having a job vs. not having one.

    4) Eliminate the self-employment tax entirely. Self-employment is often the start of a new business that will eventually employ others.

  • Headlines | The Daily Slog

    [...] I’d Fix Unemployment”–headline,, [...]

  • Raskolnik

    I am going to return to a comment from the first page, because it’s been buried, no one is really talking about infrastructure during this discussion, and I think it is a good idea to do so, both in terms of the current (ongoing) unemployment crisis and in terms of our future ability to serve as a competitive marketplace in the 21st century.

    overshoot asked, In other words, put off needed maintenance while it’s cheap and wait till the cost goes up?

    But that is the exact opposite of what I am saying [11:30 on 2 Aug]. Our roads and bridges are in terrible shape, about 1/3 of our bridges need to be replaced and the rest are up to 10 years behind on maintenance. Repairing existing roads and bridges is cheaper than building new ones, and it should be done now–for public safety, but also because repairs have a much greater short-term stimulative (i.e. counter-cyclical) effect than building new roads and bridges.

    My point about large scale public works projects, for example national broadband access or a new nuclear-powered electricity grid, is that simple political calculus advises against trying to put such a plan up for a vote in the Congress as currently constituted. Kick the TP bums out in 2012 or 2014, then we can get started.

    • zephae

      “My point about large scale public works projects, for example national broadband access or a new nuclear-powered electricity grid, is that simple political calculus advises against trying to put such a plan up for a vote in the Congress as currently constituted. Kick the TP bums out in 2012 or 2014, then we can get started.”

      I hate that I gave to agree with you on this. I don’t expect a stimulus package until at least 2013. It just sucks that one party is stopping political debate because they are selfish children who can’t fathom the idea that they don’t have the answer for everything and that they need to justify and support their positions. No, it is simply enough to mindlessly parrot “principles” and call it a day. Infuriating.

  • nhthinker

    What Frum fails to recognize is there is a fundamental impact on cultures that abuse Keynesian stimulation. And like a drug addict, almost all uses of Keynesian stimulation always lead to long term abuse of stimulation.

    Keynes’ message was that the Ant was the immoral character in Aesop’s fable of the Ant and the Grasshopper.

    Democrats for many years have been pointing to Europe as a model for the US to emulate. But money is flowing OUT of Europe, not into it, specifically due to the abuse of Keynesian stimulation.

    Capital is attracted to efficiency- Keynesian stimulation allows inefficiency to fester much longer than practical- and thus results in the flight of capital to access to greater efficiency elsewhere on the planet.

    In “Dead Right”, Frum expounded on the importance of the non-indigent taking care of themselves (emulating the Ant). Today, Frum talks like the Grasshopper.

    Aesop’s fable captured the philosophy that was stood for thousands of years. Keynes was the Pied Piper that took less than a century to lead many naive democracies to the edge of the financial cliff.

  • LaughingCat


    Haven’t had to time read all the replies. Will you make a summary of the idea you feels offer the best suggestions?

  • engelpm

    I’d like to introduce myself as the feller who suggested this column to Mrs. Frum. While I learn so much from Frum’s keen insight, sometimes I think “enough analysis, what would YOU do, President Frum?”

    I can barely spell “economist” so I rely on the great thinkers to educate me, especially in areas I have the weakest understanding. It seems clear to me that unemployment is a cancer on the economy and a general buzzkill for the country.

    My barometer for employment health is a family I know in Northern California. The wife is a stay-at-home mom with two autistic children. The father, a steelworker. They scrimp and save and do the best they can. The steelworker can’t find steady work. We don’t build things anymore.

    When The Stimulus first appeared I was hoping for New Deal’ish type of activities. We all know about our crumpling infrastructure. We have good men like this steelworker who have trouble finding jobs. Doesn’t this seem like an obvious win-win? Retrofit bridges, build more schools, prisons, whatever. Yes, yes, it means government pays for it, but who else besides Apple has the cash and wherewithal to build a bridge?

    So…improving our infrastructure made it on Frum’s list, although it was 4th or 5th. Good.

    When Mr. Steelworker gets work on a long-range project where he can feel comfortable knowing there is steady work ahead, he’s going to provide for his family and start to buy stuff. And so the recovery begins.

    Thanks, David, for this column. I’ll use it as a scoring guide in upcoming presidential debates. I hope people have already posted more Easy For Me To Say questions. I’m looking forward to more.


    • Raskolnik

      Many thanks to you as well, Paul. I like this segment, even if the idea of a “President Frum” is a bit farfetched given the current climate re: immigration law and the idea of natural born citizenship.

    • baw1064

      I like this column, too. Excellent suggestion.

      On infrastructure, I agree with you. There are people who build things who don’t have much to do right now, and things that need building/rebuilding. One problem is that our government doesn’t really differentiate between capital expenditures and operating expenses. Going into debt to build something that will have long-term benefits is different than going into debt to pay the monthly bills. The other problem is that doing a good job on large construction projects requires a lot of lead time. Throwing money at whatever is shovel-ready at a given moment, and then halting things when you decide you’ve stimulated things enough is a terrible way to develop infrastructure.

  • jack1234

    Re: FIXING UNEMPLOYMENT….for the retail, wholsale, and manufacturing segments of the economy…using a combination of the FRB and consumers capabilities.

    The FRB has a mandate to support full employment. The methods that they have used recently (Easing 1 and 2, modifying fiscal and monetary policy) have been indirect and not very effective (according to the FRB itself in achieving this mandate.

    The FRB can do something else which will more rapidly increase employment in high unemployment counties in retail, wholesale and manufacturing (to a lesser extent).

    It is based on the following fundamentals.

    1. Consumers buy mostly from retailers (local, bricks and mortar types as well as from internet sources, etc.), who buy from wholesalers who either buy from manufacturers or import goods from other countries.

    2. Unemployment is not distributed evenly across the economy and/or localities.

    3. A large portion of those currently unemployed are not highly skilled/trained indivduals but can probably fill entry/mid-level positions in retail, wholesale and some manufacturing businesses.

    4. OWNERS OF THESE BUSINESS WILL NOT HIRE ADDITIONAL PEOPLE UNTIL THEY HAVE SUFFICIENT ADDITIONAL SALES TO FULFILL. When demand increases they will first have their existing people work more hours before they add staff as well as work down their inventory before repleninshing it.

    5. Sufficient increased sales of physical goods (non-food, non services) at bricks and mortar retail stores will foster greater retail employment. When retailers replenish their inventories this creates increased sales for wholesalers. When this gets large enough it creates additional wholesale employment. When wholesalers replenish their inventory it creates at least some more demand for domestic manufacturers, who in turn need to buy materials, etc. from their sources.

    The domestic population is already being fed by whatever employment in the food industry already exists. Physical goods pass through more segments of the economy and can add more employment per retail sales dollar. Services don’t have comparable labor intensive wholesale and manufacturing sectors that support their retail sales.

    6. Retail sales are driven primarily by consumer purchasing power. Putting sufficient additional purchasing power in consumers’ hands that they must use on a timely basis to buy physical goods will provide the needed increase in retail sales to stimulate a subsequent increase in retail, wholesale and, to a lesser extent, domestic manufacturing.


    Each the Federal Reserve Board can issue Coupons-for-Jobs, not cash, to randomly selected citizens (from some authoritative list of people) within those counties which have a % unemployment which higher than their respective FRB district average (from the sum of counties in a district independent of their states). These must be used within a month to purchase physical goods at retailers in bricks and mortar stores, designated high unemployment counties. Each month different people will be selected to receive the Coupons. This process can be repeated until the local county unemployment % drops to a target level (the district average level prior to the start of the program or some other equitably defined target byb the FRB).

    These Coupons would not count as income to the recipients, because they are just a means of distributing the purchasing power authorized byt FRB.

    The “cost” of these coupons would be determined by the amount of coupons that the reatilers include in their bank deposits (identifiable by enterprise). The number of equivalent new employees can be estimated by the increase in P/R hours reported each month by these same entities.

    Asd employees are added to the businesses, approximately 70% of their net earnings are used in subsequent retail purchases or reduction of consumer debt. Some of those purchases will generate additinal retail employment demand, etc.

    Extensive calculations using BLS and other government data show that each new job requires an investment of only $13,500 of Coupons-For-Jobs. This is a vastly better ROI than any other government sponsored program implemented to date.

    And it gets results much quicker, too.

    This is not an answer for every aspect of the current unemployment crisis. It is one, however, that at least should be given prompt evaluation by the FRB (if there is a way to bring it to the attention of the right people).

    • Mallarde

      I think you should type more. Maybe you could hire someone to type your posts for you. That would create one job.

      I have a simpler suggestion: force U.S. employers to fire the 10 million or more illegal workers and hire Americans. That would cut unemployment in half.