In your opinion is the economy doing well?

[Beet]

In all the areas where it isn't doing as well (low aggregate demand, income inequality, poverty, full employment, poor infrastructure) are areas that Democrats have been saying are problems for decades, even though Democrats have been constrained by things like the overton window and the GOP from doing very much about it. In all the areas where it is doing well, they're areas that Republicans have said for decades are the standard-bearer of a good economy: low taxes, thriving companies, wealth for the rich "job creators", low CPI inflation, cutting government spending and employment, cutting union membership and power. Republicans are in the strange position of trying to denigrate an economy where the most potent chief complaints are those coming from the left of the Democratic Party.

[Beet]

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I've not heard a single Democrat mention workforce participation levels have dropped to 1983 levels, before the massive boom of the 90s.

Workforce participation is a misleading statistic because secular long-term trends have been causing workforce participation to decline that have nothing to do with cyclical economic factors or job availability. More young people are getting education at all levels; more teens are participating in extracurricular activities rather than taking the 'summer job'; a greater share of the population is over 65 (a trend which accelerated with baby boomers hitting retirement age beginning in 2011), and workforce participation statistics include them; prime, working-age men 25-54 have seen a long-term decline in workforce participation across business cycles; womens' rate of joining the workforce has also slowed across business cycles. In fact, in the plentiful jobs environment of the mid-to-late 1990s is when womens' workforce participation stopped rising.

No one is saying the job market is good at the moment [the argument is over what policies will help], so there's no need to use misleading statistics to try and make such an argument.

[Beet]

You don't want a thing to change because Washington, DC is doing well and you're in the thick of it. We understand. What we don't understand is why you refuse to admit that the rest of America is seriously struggling...

First, I've never once claimed anything that country is not seriously struggling. Of course there are pockets where things are better than average, but also pockets where things are worse.

Secondly, I do want change, just not in the direction that Romney wants.

Yes, Washington, DC, is doing well, in no small part thanks the large stabilizing role the government plays in our economy, as well as our educated workforce. However, that has nothing to do with my political opinions.

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The private sector is in a long-term deleveraging cycle, since it exhausted itself in the 20-odd years leading up to 2008. Under the current structure of the economy, this means that the sources of aggregate consumer demand that traditionally drive economic growth will be subpar, as consumers will shed more debt than they take on so long as the deleveraging phase continues.

If what is wanted is faster growth, than the government must drive it, either through cyclical or structural reform. Cyclical reform means fiscal or monetary policy that is more expansionary, like stimulus programs. Monetary policy means printing money. Currently the Democrats are unwilling to make the case for open-ended stimulus on either front. It's true that Bernanke has announced unlimited QE, however the Fed is only allowed to inject money into the financial system and not into the pockets of average people. There are both positives and negatives to this.

Structural reform means labor market reforms that increase workers' take-home pay / incomes. From the 1940s to 1970s there was fast economic growth without too fast growth in debt because incomes were rising quickly. Consumers that were making more money each year didn't need to go into debt to increase their standard of living. Private sector unions, for all their flaws, set industry-wide standards, and management felt responsible to employees because the employees and communities were considered stakeholders in the business [see Hedrick Smith's book Who Stole the American Dream? to help back me up on this, if you are skeptical]. Think Henry Ford paying workers $5 a day.

Today business is in what economists call a prisoner's dilemma. All businesses would be better off if all workers made more money, because they would be able to sell more things. But no single business can raise wages without undercutting itself against the competition. Plus, management feels obligations only towards shareholders, and not towards employees, communities, or the nation. Business is not considered a part of society, an institution of society, rather it is considered in terms of numbers only.

Basically, large bottom-up stimulus and rising nominal incomes is what is needed to grow without debt, and while the Democratic policies are better on this regard, they aren't even beginning to make the case for the vision that I just laid out.

[Beet]

Some of the workforce participation drop is due to more people gaming the system. Workers comp claims for phony injuries are way up, and of course the extended unemployment payments, food stamps etc affect behavior as well. My favorite local door and window company is going out of business in the next week or two in part due to that, and now another of my good friends is out of a job, and I am going to need to use my contacts to scramble to find him odd piece work.

Torie, what about the Georgia Works program in Obama's jobs bill?

Additionally, I believe the US should seriously look into the Hartz IV reforms implement in Germany. Georgia Works is based on a similar concept. I'm not an expert on Hartz IV (perhaps some German commentators can jump in here). Here's what seems to be relevant key points

1) To receive unemployment benefits, a person must sign a contract specifying the state's obligations to them based on their living condition, assets, income, etc. as well as their obligations to the state, which could include being required to accept a job subject to "constitutional rights, like freedom of movement, freedom of family, marriage and human dignity."

2) When a person takes a low-wage job, they can continue to receive unemployment benefits which are based on a certain minimum implied wage, plus a certain percentage of the wage they earn. The key point here is that a person can still earn more money by taking a job that pays less or about the same as unemployment benefits, so they have more incentive to do so. The government is essentially subsidizing low wage jobs.

Hartz IV remains controversial, and low wage jobs are by no means ideal. However, the program's success in reducing unemployment in Germany is dramatic and undeniable.

[Beet]

This is one of the reasons the unemployment rate is so high now- companies responded to the recession by increasing mechanization and outsourcing, as well as purging inefficiency. Unpleasant though this is for the individuals involved, it is surely a good thing. The second reason is the plummeting number of government employees on the state level(1.7 million lower since the recession began), if not for that the unemployment rate would be 7.1% rather then 8.2%. Some people might consider said downsizing a necessary evil as well.

In the past, improvements in efficiency led to lower prices, which in turn led to higher sales, which in turn led back to higher employment. Why isn't it happening this time? is a question worth asking. More likely, unemployment can't be explained by efficiency improvements.

The problem with unemployment is this-- human beings, our time, or skills, or experience and knowledge, constitutes part of society's wealth. I've already agreed that workforce participation rate drops aren't necessarily bad news. People could be using their time to do other productive things, like getting education, volunteering, staying home to raise children, or simply enjoying retirement. IMO, people themselves are best positioned to determine what is best for them, and it's not up to policymakers or economists to place value judgments on these choices (unless o/c they're collecting things like unemployment comp that are not meant for them). However, for people who want to work, and are seeking work, if they cannot find it, then the non-utilization of their time, skills, experience and knowledge is a waste of part of society's wealth. The longer they are not working, the longer their skills atrophy. Not to mention it deprives them of a living middle-class income. That's why low workforce participation isn't necessarily a problem but high unemployment is a problem.

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Of course, if aggregate demand increased in other countries (and some of this increase could be only nominal, i.e., exchange rate), then the US could better balance our trade deficit without explicitly reducing aggregate demand.

[Beet]

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Great argument, except for the fact that people 55+ have actually seen their workforce participation increase.
[/quote]

I'm aware of that (and it's yet another trend that has both secular and cyclical components)- but it doesn't contradict the notion that changes in workforce participation can't be used as a proxy for job availability or the economic cycle, or any of the other factors I pointed out. If anything, it reinforces the absurdity of it-- 65+ have always had much lower workforce participation rates than under 65's, but no one would have called that a crisis. Nor does the fact that more 65+ are joining the workforce mean they are better off. It depends on why they're doing it. If they're doing it based on need, then rising workforce participation is actually a bad sign.

[Beet]

Well yes, you would need to look at the components of growth. Housing-bubble or other private-sector debt fuelled growth wouldn't get us very far. I don't think we actually disagree much on this. It's just that there is high unemployment, a high deficit and still a debt overhang, and growth is the best way to deal with all three problems. Christina Romer pointed out that in the mid-1930s and then mid-1980s, the economy grew at rates of up to 8 or 9 percent. Now it's 1 to 2 percent. So for all the talk of structural unemployment, the explanation for unemployment could simply be cyclical.

[Beet]

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These secular forces are working against - not for you. That's my point. As bad as the numbers are now - they will be even worse later on. The 55+ crowd isn't going to work forever, but right now, the numbers are looking better than they actually are because they are going back to work.

But you have no evidence that the rise in workforce participation among older workers is temporary, and even if it was, it would have nothing to do with my point. Again, low workforce participation isn't necessarily a bad thing for many reasons.