The Shortsighted Keynesians
1st November 2011
Richard Epstein is a smart guy who realizes that there are no quick fixes available for our economy.
The constant question of the audience members was what could be done for them in the short run. That sentiment was captured by Shaila Dewan, a New York Times reporter present at the debate, who, to great applause, wanted to know “what do you do in the short run” to help the unemployed?
It is never fun to be the bearer of bad tidings, but the blunt truth is that Obama’s jobs plan will not work. The audience, however, was in no mood to acknowledge that there is no magic short-term fix of the sort that Zandi and Rouse promised. Indeed, the full set of proposals in the Obama jobs plan is likely to set matters back even further. Zandi and Rouse’s misguided optimism demonstrates everything wrong in today’s thinking about job creation in the United States.
The only way to fix the short-term unemployment problem is by fixing the long-term issues that have fallen into treacherous disrepair over the past decade. Several long-term issues that must be fixed include, for starters, minimum wage legislation, unionization, and employer health-care mandates. Then, once we get an improved business environment, investors and employers will come off the sidelines and start investing and hiring. But without that change, prudent investors will shy away from productive ventures, preferring to hoard their money in treasury bills. The longer we wait to implement these overdue reforms, the more delayed the recovery will be.
We didn’t get here overnight, and we’re not going to get away from here overnight. But in this modern instant-gratification culture, that’s not a message to which people’s ears are tuned.