Given the increase in unemployment, it seems that those economists who warned that the $7 87 -billion stimulus package passed by Congress in February was too small were right. Since President Barack Obama sold the stimulus as a "jobs bill," the lack of job creation is bound to create political difficulties for him.
From the Editors Stimulate D espite the stabilization of the finan- remains a potential economic relapse, and possibly deflation. It will take years for the phantom “assets” on the books of cial markets, a rising stock market, banks and other financial institutions to be paid for or written and what appears to be modest off. In the meantime, as the staunchly pro-market Economist writes, if we are to avoid repeating the mistakes of the 1930s growth in the economy as a whole, unem- or the economic paralysis of Japan in the ’90s, “the future of ployment rose to 9.8 percent in September. many Western economies will look more like continental Eu- When all those who have given up looking rope in the 1980s, with large deficits, heavy public debts, and stubborn unemployment.” This, the Economist notes, is still for work are counted, the actual number preferable to what would have happened had the fate of the of unemployed is much higher, perhaps 15 world’s economy been left to the market alone. In these circumstances, the worst policy proposal imag- percent or more. inable is the one put forward by the Republican leadership Economists and politicians (at least Democratic politicians) in Congress to freeze government spending and balance the are quick to note that employment is a “lagging indicator”— federal budget. That would truly mean repeating the mis- that the economy is in the midst of a predictable “jobless re- takes of the Great Depression, when FDR attempted to bal- covery.” In other words, even as things improve, employers ance the budget during his second term only to deepen and remain wary of adding to their payrolls until they are confi- prolong economic stagnation. (Still, the chutzpah of politi- dent about prospects for the future. In the meantime, 8 mil- cians who vigorously championed the Bush administration’s lion people have lost their jobs since the recession began, the budget-busting tax cuts and Medicare benefit program is im- worst period of job loss since World War II. One out of every pressive.) Instead, more federal help needs to be extended to four families has seen someone lose a steady paycheck. And the unemployed and to state and local governments, propos- few experts expect things to get better soon. There seems to als the Obama administration is pursuing, and there should be little doubt that unemployment will climb to more than be new
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