Another Slow Recovery from Economic Disaster
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Letter from America
Another Slow Recovery from Economic Disaster The lesson learned from the Great Recession was that the initial stimulus was far too small. The subsequent austerity during the recovery directly obstructed a return to full employment. There had been hopes that a Biden administration would quickly implement an aggressive stimulus. In addition to measures to control the pandemic, the hoped-for stimulus would also include a large clean energy component and major expenditures on childcare and health care. Given the outcome of the elections, there seems little hope for the amount of stimulus the economy needs. The Republicans are likely to maintain control of the Senate, although two January run-offs still provide some hope for the Democrats. This means that Majority Leader Mitch McConnell, the same person who openly worked to thwart the Obama presidency, would be in control for at least the first two years of the Biden presidency. If Biden wants to get back quickly to something like full employment and make progress on an agenda to limit global warming and reduce inequality, he will have to find creative paths that work around the obstructions of Mitch McConnell. This will be difficult, but not impossible. One way that Biden may reduce unemployment is through the promotion of worksharing. Many European countries used worksharing in both the last and current recession to keep the unemployment rate relatively low, even as growth faltered. Germany was the champion in this area, managing to actually lower its unemployment rate in 2009 and 2010, even as its GDP loss was greater than in the US. Worksharing has won support across the political spectrum in the United States. John Boehner, who was the Republican Speaker of the House in 2011, supported measures to promote worksharing and many of the leading Republican economists have publicly endorsed proposals for increasing the use of worksharing, which is already part of the unemployment insurance system in most states. One advantage worksharing has over other ways to lower unemployment is that it does not require substantial expenditures. It essentially means that the money used to pay unemployment benefits instead supplements the pay of workers who are putting in reduced hours. There is no principle that says it is better to pay a worker to be completely unemployed – with unemployment benefits – than to be partially unemployed with a worksharing supplement. In the absence of large-scale stimulus, worksharing can also help to address other important problems. The pandemic is likely to permanently reshape the structure of our cities, as many more people work remotely. This will mean fewer people commuting to work each day. This is a great development from the standpoint of reducing the resources wasted in commuting, and even more so from the standpoint of lowering greenhouse gas emissions. Still, it means that many of the jobs associated with servicing this commuting population will disappear. Millions of people formerly employed in restaurants that provided lunc
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