Jobs and austerity, subsidies, trade and deregulation...

In yesterday's New York Times Jared Bernstein shares his concerns, and offers advice, with regard to our present employment woes. To fully appreciate the following you'll need to read his article first. It'll take you just a couple of minutes.

Okay, now that you get where he's coming from, here again are his suggestions, followed by (what I believe to be) better sense:

What would it take to reverse these trends? For one thing, in the near term, do no harm. Austerity, including sequestration, is the economic version of medieval leeching. The Federal Reserve continues to apply high doses of monetary stimulus, and that’s supporting low interest rates, which in turn are linked to the improving housing market. But it can’t do it alone, and Congress is counteracting such tailwinds with fiscal headwinds.

Austerity, including sequestration, is the economic version of getting yourself in shape after suffering an obesity-caused myocardial infarction. Although the kind of "austerity" we've imposed here in the U.S. is the economic version of reducing an obese caloric intake of 6000/day by a mere 150 calories (literally).

We also need a significant, permanent program to absorb excess labor (an explicit part of the Humphrey-Hawkins law). We should consider restarting and rescaling a subsidized jobs program from the 2009 Recovery Act that, though relatively small, made jobs possible for hundreds of thousands of workers.

Subsidized, by definition, is the process of extracting resources from one group and distributing to another. With the politician being the extractor and distributor. To presume that such an exercise would yield some net economic gain is to presume that the politician can better allocate income than can those who worked their tails off to earn it.

And we have to reassess our manufacturing policy, including reducing the trade deficit. That means both reshaping our dollar policy — going after competitors who suppress their currencies’ value to get an edge on net exports — and public investments in areas where clean energy intersects with production.

Man I wish we had a trade deficit. How awesome would it be for us if China, for example, would give us stuff without taking anything in return? Jobs wouldn't be an issue, we'd have everything we need without having to produce a thing.

The fact of the matter is that the "trade deficit" is an outright myth --- seriously, it's an utter impossibility. Think about it; who would trade something for nothing? The reality is that the Chinese, for example, make stuff super-cheap for us, not because they love us, but because they love stuff that we produce (assets included) that they need U.S. dollars to buy/invest in. E.g., we buy some cell phone covers from them, they buy some pistachios from us. If they're willing to sell us more dollars worth of cell phone covers than they need to buy pistachios, it's absolutely because they want to invest in businesses, treasury bonds, real estate, etc.

Going after competitors who allegedly suppress their currencies' value to give us a break in cost, would be the economic equivalent of shooting ourselves in the proverbial foot, big time! Oh, and the U.S. "going after" currency suppressors is the economic equivalent of the pot calling the kettle black.

As for public investments (subsidies) in clean energy, let's just say our record-to-date speaks for itself.

Finally, financial deregulation has become the enemy of full employment: it funnels capital to unproductive parts of the economy, and plays a key role in the “shampoo cycle” of bubble, bust, repeat. Less volatile capital markets mean fewer shocks to the job market.

Jared misses a critical step in the "shampoo cycle" of bubble, bust, repeat. The problem is not deregulation as much as it is the cycle of bubble, bust, bailout, repeat. Knowing you can't lose allows for the most egregious mismanagement.

Sadly, Jared's proposals, if adopted, would not only not help, they'd in all likelihood exacerbate the issue...