The states' anti-Keynesian experiments

It's beginning to feel a lot like 1937 these days.

Companies added 64,000 jobs last month, after having added 93,000 jobs in August, the Labor Department reported Friday. But over all, the economy shed 95,000 nonfarm jobs in September, the result of a 159,000 decline in government jobs at all levels. Local governments in particular cut jobs at the fastest rate in almost 30 years.

“We need to wake up to the fact that the end of the stimulus has really hit hard on local governments,” said Andrew Stettner, deputy director of the National Employment Law Project. “There is much more of a slide in the job market than what we really need to clearly turn around.”

Exhibit #1, hack ideologue Chris Christie, who has decided his state needs neither jobs nor a working infrastructure...Oh, nor the federal money intended to pay for it.

The largest public transit project in the nation, a commuter train tunnel under the Hudson River to Manhattan, was halted on Thursday by Gov. Chris Christie of New Jersey because, he said, the state could not afford its share of the project’s rising cost.

Mr. Christie’s decision stunned other government officials and advocates of public transportation because work on the tunnel was under way and $3 billion of federal financing had already been arranged — more money than had been committed to any other transit project in America.

The governor, a Republican, said he decided to withdraw his support for the project on Thursday after hearing from state transportation officials that the project would cost at least $2.5 billion more than its original price of $8.7 billion. He said that New Jersey would have been responsible for the overrun and that he could not put the taxpayers of the state “on what would be a never-ending hook.”

In scrapping the project, Mr. Christie is forfeiting the $3 billion from the federal government and jeopardizing as much from the Port Authority of New York and New Jersey. The state may also have to repay the federal government for its share of the $600 million that has already been spent on the tunnel.

The tunnel, which would have stretched under the Hudson from North Bergen, N.J., to a new station deep below 34th Street in Manhattan, was intended to double the number of trains that could enter the city from the west each day. The project’s planners said the additional trains would alleviate congestion on local roads, reduce pollution, help the growth of the region’s economy and raise property values for suburban homeowners.

The tunnel was also supposed to provide jobs for 6,000 construction workers just as some other big transit infrastructure projects in the city, like the Second Avenue subway, were winding down.

Instead, the contractors hired to dig the tunnel will soon start laying off workers.

I would be stunned except that Christie has shown nothing but contempt for the people of New Jersey since he began his campaign.

Krugman concludes thusly:

So this was a terrible, shortsighted move from New Jersey’s point of view. But that’s not the whole cost. Canceling the tunnel was also a blow to national hopes of recovery, part of a pattern of penny-pinching that has played a large role in our continuing economic stagnation.

When people ask why the Obama stimulus didn’t accomplish more, one good response is to ask, what stimulus? Leaving aside the cost of financial rescues and safety-net programs like unemployment insurance, federal spending has risen only modestly — and this rise has been largely offset by cutbacks at the state and local level. Many of these cuts were forced by Congress, which has refused to approve adequate aid to the states. But as Mr. Christie is demonstrating, local politicians are also doing their part.

And the ideology that has led Mr. Christie to undermine his state’s future is, of course, the same ideology that has led almost all Republicans and some Democrats to stand in the way of any meaningful action to revive the nation’s economy. Worse yet, next month’s election seems likely to reward Republicans for their obstructionism.

So here’s how you should think about the decision to kill the tunnel: It’s a terrible thing in itself, but, beyond that, it’s a perfect symbol of how America has lost its way. By refusing to pay for essential investment, politicians are both perpetuating unemployment and sacrificing long-run growth. And why not? After all, this seems to be a winning electoral strategy. All vision of a better future seems to have been lost, replaced with a refusal to look beyond the narrowest, most shortsighted notion of self-interest.

Short-sighted indeed. Christie could have railed against cost-overruns, union rules, construction delays, etc., all the while benefiting from the largess of other federal and regional agencies and watching New Jersey's construction workers go back to work

But what it does do is make Republican operatives swoon and Christie dream of the Oval Office.

Keynes 101

K-Thug is perhaps being too kind to Blue Dogs and morons, but he uses his space today to put some learning on Congressmen who "believe" that extending jobless benefits (aka, doing the right thing) will allow the unemployed to be too "choosy," or will have some devastating effect on the deficit.

But there are also, one hopes, at least a few political players who are honestly misinformed about what unemployment benefits do — who believe, for example, that Senator Jon Kyl, Republican of Arizona, was making sense when he declared that extending benefits would make unemployment worse, because “continuing to pay people unemployment compensation is a disincentive for them to seek new work.” So let’s talk about why that belief is dead wrong.

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

But won’t extending unemployment benefits worsen the budget deficit? Yes, slightly — but as I and others have been arguing at length, penny-pinching in the midst of a severely depressed economy is no way to deal with our long-run budget problems. And penny-pinching at the expense of the unemployed is cruel as well as misguided.

So, is there any chance that these arguments will get through? Not, I fear, to Republicans: “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, in this case, his hope of retaking Congress — “depends upon his not understanding it.” But there are also centrist Democrats who have bought into the arguments against helping the unemployed. It’s up to them to step back, realize that they have been misled — and do the right thing by passing extended benefits.

As Krugman writes at the start of his column, extending benefits in the midst of a massive downturn and unemployment used to be taken for granted. Nowadays, as Republicans cynically calculate and far too many Democrats impotently dither, not so much.

Holding the unemployed hostage to midterms

This headline pretty well sums up our dysfunctional government:

Unemployment bill fails to beat filibuster, 59-37

Republicans, along with a delusional Ben Nelson, believe the prospect of picking up a few more seats in Congress is more valuable than easing the burden for the unemployed in an economy that still isn't adding jobs. Or aiding states whose coffers are exhausted, which could make a real impact on the national economy. The cynicism is, even by current standards, stunning...and since most of the media simply reports, "Senate fails to extend jobless benefits," the real villains here go unmolested.

The pity, though, is that this dispute has gotten quieter and quieter, even as its results have become more and more dire. The vote last night means that 2 million Americans will lose their unemployment checks by July 12. But neither the New York Times nor The Washington Post are carrying it on their homepages above the fold.

As my unmarried partner Annie Lowrey points out, the nature of these benefits, which expire every few months and force a new round of votes and battles, has left everyone -- particularly the Senate exhausted by the subject. Promoting another story about another vote to extend another round of another jobless program blends into the background at this point. And that means that even if the Senate does manage to pass one more extension when they return in mid-July, it's likely to be the last of the extensions. The problem, of course, is that unemployment does not share their exhaustion.

"Fundamentally dishonest"

We've wondered when the so-called liberal media would ask a deficit peacock calling for spending cuts what, exactly, he'd cut. Well, MSNBC's Melissa Frances and Contessa Brewster did just that, asking Judd Gregg to be specific. The results were not pretty.