american enterprise institute

Lingering Unemployment Poses Long-Term Risk

Nearly five million Americans out of work for more than six months are left to wonder what kind of help might be coming, as the Federal Reserve, the International Monetary Fund and a bipartisan swath of policy experts implore Washington to act — both to alleviate human misery and to ensure the strength of the economy.

The pain of the long-term unemployed has persisted even as the overall jobs picture has brightened a bit and the unemployment rate has fallen to 7.8 percent. The new government report for October was due to be released Friday morning.

“The problem is incredibly urgent,” said Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute and an adviser to Mitt Romney’s campaign. “Spain had a financial crisis in the late 1970s and has never seen its unemployment rate drop back to where it was before that crisis. The unemployed become discouraged, and ultimately the employment to population ratio might take a permanent hit.”

On the agenda for the next Congress and the next president is ensuring that the unusually long spells of unemployment now afflicting jobless workers remain a temporary setback of the recession.

Economists warned that long-term unemployment could be transformed in the next few years into structural unemployment, meaning that the problem is not just too few jobs and too many job seekers, but a large group of workers who no longer match employers’ needs or are no longer considered employable.

“Skills become obsolete, contacts atrophy, information atrophies, and they get stigmatized,” said Harry Holzer of Georgetown University.

That has been the experience of millions of workers like Beatrice Hogg, 55, of Sacramento, a college-educated white-collar worker who has slid from the middle class into poverty.

Her last job — doing administrative work and advising students at a community college — ended in June 2009. Her unemployment benefits ended more than a year ago. She was evicted from her apartment in December and has been staying at friends’ homes and occasionally at train stations. Despite her efforts, she has been turned down for job after job after job, and is surviving on food stamps.

“I don’t enjoy being out of work,” Ms. Hogg said in an interview. “I don’t enjoy having to ask friends to give me rides or get things for me. I want to take care of myself. I’ve been on my own since I was 18 years old. It’s hard for me. It’s demoralizing. It’s hard to ask people for things when you’ve been independent the rest of your life.”

Stronger economic growth may help to whittle the ranks of the long-term unemployed over time, experts said.

“There must have been a lot of workers badly scarred by long bouts of unemployment in the Great Depression,” said Gary Burtless of the Brookings Institution. “Even in 1939 we had unemployment somewhere around 14 percent, as we’d measure it today. A lot of people who were jobless had been jobless for a long, long time. But in the space of a couple of years those disadvantages looked like nothing given that employers had voracious appetites for workers.”

But many economists contended that policies to help the long-term unemployed are needed as well, to ensure that they have the skills necessary to compete for the jobs that the economy is adding — turning construction workers into oil-and-gas extractors and administrative assistants into home health care providers, for example.

In Washington, many politicians support measures for the long-term unemployed; few demand them.

Both Democrats and Republicans have proposed or supported revamping job-training programs, giving states more flexibility in using funds for the unemployed and providing credits to companies that hire workers who have been out of a job for more than six months, for instance.

Annie Lowrey reported from Washington and Catherine Rampell from New York.

Article source: http://www.nytimes.com/2012/11/02/business/economy/lingering-unemployment-poses-long-term-risk.html?partner=rss&emc=rss

Week in Review: The Budget Debate, Revealed

The battle ahead “is the big one, and goes to the very major questions about the role of government,” said G. William Hoagland, a former Republican staff director of the Senate Budget Committee. “This is going to be a very fundamental clash of ideologies.”

The Democratic and Republican Parties have their own internal tensions to address as the debate goes forward in Congress and on the presidential campaign trail. But in its early stages at least, it is liberals who are on the defensive.

The aging of the baby boom generation and the costs of maintaining Medicare and Social Security have put the two pillars of the social welfare system on the table for re-examination. The growing weight of the national debt has given urgency to the question of whether the government has become too big and expensive.

The tepid nature of the current economic recovery, following big stimulus packages, has provided an opening to challenge the effectiveness of Keynesianism as the default policy option for government. And the revived energy of grass-roots conservatives has given electoral clout to the movement’s intellectual and constitutional arguments.

Arthur Brooks, president of the American Enterprise Institute, the conservative research organization, said, “The optimistic view is that we have a confluence of the business cycle, of the demography and of the politics that makes it not just possible to achieve real change, but impossible that we not deal with these things if we want this country to continue on the path envisioned by the founders.” So just two and a half years after a presidential election that was in part a repudiation of conservative governance, and with the nation still smarting from the aftereffects of a financial crisis that grew out of failures of markets and regulation, President Obama finds himself in a somewhat surprising position: forced to articulate and sell a vision of how liberalism and the institutions it built in the 20th century can be updated for the constraints of the 21st.

The speech he delivered Wednesday at George Washington University in Washington was his most ambitious effort so far to do so. In it, he harnessed the language of both left and right to argue against the extremes on both sides while suggesting that many of their core principles were not mutually exclusive — in other words, that Great Society values can endure in a Tea Party moment.

He defined “patriotism” as a shared sense of responsibility for the vulnerable and less fortunate. Basic standards of security for the elderly and poor and government investment in a more prosperous future, he said, can not only coexist with a tradition of “rugged individualists with a healthy skepticism of too much government,” but are also a vital part of what makes America exceptional.

“We are a better country because of these commitments,” he said. “I’ll go further — we would not be a great country without those commitments.”

Republicans in Congress, he suggested, would shred that tradition under cover of a debate that is only nominally about the budget. “The fact is,” he said, “their vision is less about reducing the deficit than it is about changing the basic social compact in America.”

Conservatives would and did object to his implication of heartlessness, but not necessarily to his assessment of their ambition.

The Republican plan put forward by Representative Paul Ryan of Wisconsin, the chairman of the Budget Committee, and adopted by the House on Friday as its policy blueprint for the next decade contains a substantial dose of deficit reduction but is really a manifesto for limited government.

Article source: http://feeds.nytimes.com/click.phdo?i=4502f269b76d86d01ae54532e839677a

Lingering Unemployment Poses Long-Term Risk

Week in Review: The Budget Debate, Revealed

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