Harvard economist Martin Feldstein thinks that the crisis the US faces is a shortage of jobs, not the national debt.
The US unemployment rate reached 9.2 per cent in June, … double the 4.6 per cent rate in 2007 just before the recession began. ….
Labour market conditions are even worse than the unemployment rate implies. … [A]bout 3m Americans who would like to work but cannot find jobs are not officially counted as unemployed because they have not looked for work in the past month. And there are another 9m employees who would like to work full-time but are only able to get part-time work. Add together all of this and we find 29m Americans who cannot find the full-time work they want, a number equal to almost 20 per cent of the labour force.
The high unemployment reflects the lack of demand rather than any fundamental problems with the US labour market. ….
Since the central bank had not caused the downturn by raising interest rates, it could not cure the downturn by lowering rates. It focused successfully on fixing the credit markets but that was not enough to turn the economy around.
The policies of the Obama administration did not reverse the large initial fall in demand …. Although the
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