Sad

05.15.13

D.C. Decides That Unemployment Is So 2009

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I'm working on a little less than all cylinders this week, but I don't want to overlook an important piece by Derek Thompson in The Atlantic. Thompson contrasted the decisive and effective government response to the financial crisis of 2008 to the weak and exhausted response to the unemployment problem.

You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.

The deficit fell fast. As unemployment ebbed, the ranks of long-term jobless calcified, creating two separate job markets. One broken market for people out of work for more than six months. And another slowly healing market for everybody else. But the combination of a thermostatic recovery and a deep aversion to stimulus crushed any hope that the long-term unemployed would get the help they needed. Long-term unemployment isn't special just because it's longer; it's special because it's self-perpetuating. Skills atrophy, networks dry up, and employers discriminate, creating a vicious cycle of joblessness that can't be cured by normal economic growth.

There is little question that, in the last two years, Washington has essentially left the long-term unemployed to fend for themselves -- and permanently scarred the labor market.

Thompson aptly observes that the abandonment of the long-term unemployed cannot be blamed on Republicans alone.

In the last year, there has settled, even among the Democrats, a kind of reserved defeat that shows a stunning lack of urgency toward the crisis of long-term joblessness. From abandoning the payroll tax cut in late 2012, to quietly acceding to sequester, to going silent on unemployment, nearly all of Washington—not just the right—has essentially stopped talking about the most important economic issue of our time.

High-ranking Treasury officials officials I've spoken with on background couldn't name any specific proposals they have to help the long-term unemployed. Instead, they've argued that general economic growth stuff, such as infrastructure spending, should be enough to put these 4 million people back to work. But the economic literature objects: Fighting vast long-term unemployment with general economic growth policies is like fighting pneumonia with Vitamin C.

Thompson could go further: The one major administration measure that has any chance of passage this year could not be more perfectly designed to worsen the problems of the long-term unemployed: the Rubio-Schumer immigration reform. Under the bill, millions of non-Americans will suddenly gain access to vast new reaches of the U.S. labor market. Immigration flows will accelerate, including guest worker flows. The bill guarantees—is intended to guarantee—ultra-slack labor markets across a wide variety of specializations for years and decades to come. If you're a 55-year-old laid-off autoworker who holds any reserve expectation of ever again enjoying the standard of living you had before 2008—a.k.a. "attitude"—this bill ensures that you will never, ever work again. And it ensures that the autoworkers' children, unless very unusually bright and motivated and lucky, will probably have to choose between earning half of what their father earned and never, ever working again.

A country that took seriously the unemployment problem would not even consider such a measure as Schumer-Rubio. It would say, "Let's put our unemployed back to work first." But Democrats and Republicans alike have higher priorities: ethnic politics for Democrats, employer demands for Republicans.

The scandals now reverberating through Washington reduce to zero any last vestigial possibility of further action on jobs. Congress will plunge into full scandal-investigating mode. The more hot-headed Republicans will bay for impeachment. The work of damage control will consume administration energies. Nothing will get done. But then, nothing was going to get done anyway.