Thank You Teresa Tritch: Reducing The Deficit Is Not Always The Correct Policy
Teresa Tritch, a long-time friend from what now seems like a previous life who currently is at the New York Times, had a great fact-laden, long-form editorial in the Sunday paper about what it's going to take for the recession to be over in peoples' lives rather than just reflected in the headline statistics.
The whole piece is definitely worth reading, but here's the money quote:
What distinguishes this jobs recovery from others is the sheer scale of the job loss that preceded it. The economy has regained 3.6 million jobs since employment hit bottom in February 2010, but it is still missing nearly 10 million jobs — 5.2 million lost in the recession and 4.7 million needed to employ new entrants to the labor market. The Economic Policy Institute estimates that at the average rate of job creation in the last three months, it would take until the end of 2017, fully 10 years from the start of the Great Recession in December 2007, to return to the pre-recession jobless rate of 5 percent.
Several points need to be made about the piece.
First, Teresa's point about how long it took for "the job gap" from the 2001 recession to close is especially important in the context of the the current economic recovery. The number of jobs was artificially high and the unemployment rate unofficially low by the time the 2008 recession began because of housing that we now know was ridiculously overvalued. Combine the bubble with the ability of consumers to borrow against the overinflated prices and homeowners to get absurd prices when they sold and it's easy to see how business was stimulated to expand and hire to take advantage of the higher demand for...well...everything but what economists call inferior goods.
In other words, judging the strength of the recovery by a standard that requires the number of jobs to return to the previous high likely is not as possible now as it was before and, as Teresa points out, it wasn't that easy before either.
Second, Teresa's point about at the end about the need for the appropriate fiscal policy rather than an economically blindfolded allegiance to deficit reduction is exactly right.
The right time to make significant progress on the federal deficit is when the private sector is driving the economy and that means it should have happened in 2005-2007. Those who stood by and watched as spending was increased and revenues reduced when the time to reduce the deficit was right shouldn't be given any credibility to whine about not doing something now when it's not.