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EU unemployment is a problem. | 70 comments (70 topical, editorial, 0 hidden)
Re: EU unemployment is a problem. (none / 0)
Debt does have that effect, although it is a deeply perverse way to address the problem.

The US deficit is caused by the Bush tax cuts, which is part of the overall conservative strategy to redistribute income upward. The tax cuts do raise demand, but you could get bigger bang for the buck in other ways if that was your first priority.

I think the explosion in consumer debt is an attempt by households to maintain living standards in the face of incomes that are growing only slowly, or even shrinking in real terms. This does prop up demand, but it is not sustainable in the long run. Again, the root of the problem is political: slow wage and income growth, due to excessive corporate power brought about by the evisceration of institutions like labor unions and labor market regulations designed to ensure that workers get their fair share of the growing pie.

by TGeraghty on Wed Mar 29th, 2006 at 04:07:51 AM EST
[ Parent ]
Re: EU unemployment is a problem. (none / 0)
Debt does have that effect, although it is a deeply perverse way to address the problem.
This ties in with rdf's diary credit = growth, to which DeAnander quipped that "credit" is just another word for debt.

Maybe you'd like to comment over there?

By the way, Drew owes me a diary on debt-based money and how it is [not] a perverse vay to run a monetary policy.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Carrie (migeru at eurotrib dot com) on Wed Mar 29th, 2006 at 04:13:29 AM EST
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Re: EU unemployment is a problem. (4.00 / 2)
Let me backtrack a bit.

I agree with Drew that debt is not necessarily perverse. At reasonable levels it is part of a well-functioning economic system.

What is perverse in the US is the level to which debt is substituting for sustainable growth in living standards from wages and incomes.

It's all a question of balance.

by TGeraghty on Wed Mar 29th, 2006 at 04:30:51 AM EST
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Re: EU unemployment is a problem. (none / 0)
I mentioned it because I have the perception (perhaps wrong) that the modern right has been in the vanguard of disdain for acting on aggregate demand. ("Supply-siders" spring to mind of course.)

However, in power the Bush admin has acted in a different manner and I suppose I see a danger that they get a bit of it before a lot of the left does.

(This comes out of observing the renewed rise of a "fiscally responsible" left, which I worry has internalised too much of the supply-side nostrums.)

by Metatone (metatone [a|t] gmail (dot) com) on Wed Mar 29th, 2006 at 06:49:10 AM EST
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EU unemployment is a problem. | 70 comments (70 topical, 0 editorial, 0 hidden)
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