On Economic Insecurity

The political writer Johnathan Chait wrote an interesting piece debunking one of the myths about the 2009 stimulus bill. An excerpt:

Geraghty’s second and third sentences repeat an old and especially insipid Republican talking point: The stimulus failed because the administration’s economists projected it would hold unemployment to 8 percent, and unemployment actually topped out at 10 percent. This is clearly wrong because the source of the error is entirely due to the fact that the administration’s projection reflected official estimates at the time that massively underestimated unemployment levels. As we now know, but did not know at the time, unemployment was already at 9 percent when the stimulus was passed. So of course the stimulus failed to hold unemployment below 8 percent — that would have required going back in time.

I do think however that it’s worth exploring the reasons people believe that the 2009 stimulus (as well as other subsequent attempts to improve the economy) failed to do much if anything. Despite the economic fundamentals (i.e. unemployment rate, productivity growth, inflation, et al.) trending in the right direction, the aspects of the economy that the average worker tends to put more weight on are not doing quite so well. Wage growth for one is largely stagnant, and not only is the average person not getting wealthier but they are getting relatively poorer next to those who are seeing a rise in wealth, those lucky few at the top.

And of course, outsourcing and offshoring increase economic insecurity even if other jobs exist to replace those lost, since it makes planning for future endeavors or making expensive purchases (i.e. homes, cars, et al.) more risky. That type of uncertainty can’t be quantified but it is a potent factor in people’s lives.

For whatever reason, people have trouble squaring the good economic news with the bad. When reports of a low unemployment rate don’t square with people’s sense of
how poor the economy is, they tend to be skeptical. This shouldn’t be, but it is understandable. Economics does not speak the language of human experience as well as it needs to, and unfortunately this divergence is then exploited for ideological ends. I suppose it is a lot to hope that we could expect better from the leaders of our society, but we ought to.


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