Unintuitive certainty in these medieval times of economic illiteracy. 

"Your Fat Paycheck Keeps Neighbors Unemployed" Kevin Hassett

"Economics teaches that full employment would be reached if wages adjust downward, to a level that better reflects current circumstances.  At lower wages, employers would desire more workers.  Labor markets generate persistent unemployment only if wages are sticky, failing to fall as demand declines.

A number of reasons help explain why wages don’t and won’t drop, beginning with federal and state minimum-wage laws.

Second, because union contracts generally cover multiple years, adjusting wages in response to economic circumstances would require a return to the bargaining table, which rarely happens."


The article stands in stark contrast to another in an endless string of misguided pablum; not surprisingly featured in the New York Times.

"How to End the Great Recession" by Robert Reich. 

This witch burning piece of political propaganda and revisionist history is constructed on absurdly twisted logic, and is supportive of the 1930s public policy response which proliferated The Great Depression.

In summary the article:

• Misidentifies a lack of consumer purchasing power as the driver of the recession (and pines for the days of HELOC driven consumption)

• Blames the crisis on decades of technological progress (A popular concept during the Dark Ages)

• Cites the free flow of capital and migration of manufacturing to low-cost destinations as undermining American incomes (In defiance of any Econ 101 textbook)

• Mr. Reich ignores that life in America has been getting better not worse for decades (except during the last several years).  Mr. Reich apparently pines for the days 15 years ago where no one had cell phones, the internet was a 52kb nightmare, and flat screen TVs didn't exist. 

• Mr. Reich observes that $2.3 trillion in home equity was extracted from 2002 through 2007, but he attributes it to Americans being forced to borrow in order to cope with their lack of income growth.  How pray tell does a 5 year long bender during which Americans bought motorcycles, boats, cars, vacations, destination weddings, Las Vegas jaunts, granite kitchen tops, etc... count as borrowing just to cope?

• He condemns the rich for spending so little money (saving) and investing their savings where they can get the best return (abroad).  Since when is saving or earning a return on investment bad?  Furthermore, the rich would be more disposed to invest in the U.S. if we didn't have the world's second highest corporate tax rate and a political administration focused on restraining economic growth.

• Reich then hails New Deal initiatives which perpetuated The Great Depression for a decade as the right response to our current economic downturn.  The minimum wage is keeping unemployment high as are two years of unemployment benefits (I met a guy last week who is an aspiring writer and unemployed only because of such never ending benefits). 

• In reality we are 2 years into a "New, New Deal".  Higher minimum wage, extended unemployment insurance, stimulus spending, massive deficits, cash-for-clunkers, health care reform, regulatory reform, check in the mail, etc...  FDR would be proud.