Category Journalism

Do We Have a Structural Unemployment Problem?

Danny Vinik 1 Comment

That was the question that economists Peter Diamond, Dean Baker and Kevin Hassett debated yesterday afternoon in a panel discussion at the American Enterprise Institute (AEI). Moderated by AEI’s Michael Strain, the panel did not disagree on much, particularly its emphasis on the need for government programs to help the long-term unemployed.

Nobel Prize winning economist Peter Diamond, now professor emeritus at MIT, kicked off the debate by arguing against the oft-repeated claim that the current unemployment problem is not just cyclical, but is structural as well. He focused on the Beveridge Curve, which graphs the unemployment rate compared to the job vacancy rate. It’s shown below:Beveridge Curve

When the unemployment rate is high, the vacancy is rate is low as that generally coincides with recessions when employers aren’t hiring. As you can see from the graph above, the concern amongst economists is that there are now more job vacancies for higher levels of unemployment in the past few years compared with the recent decade. However, Diamond was dismissive of this, nothing that over the long-term, the Beveridge Curve fluctuates dramatically and often crosses back above itself after recessions.

“This is not a tight, technical relationship,” he said. “This is a curve that moves all over the place, in part for reasons we could identify, in part not.

“The path back being above it has happened a number of times before and sometimes after that you stay above,” he added. “Sometimes after that when you get back toward full employment, you’re back to the old curve or even below it. So the issue of thinking about how to interpret the path we’re seeing is something that really calls for digging underneath these aggregates.”

Diamond emphasized that a couple other economic points indicate that this is a cyclical unemployment problem. In particular, the lack of wage growth in any major industry is very surprising if the structural unemployment theory is true. If there was a structural unemployment problem, firms would be unable to find workers with the adequate skills and would have to increase wages to fight for the scarce talent. But that hasn’t been the case, Diamond said. Wages have been stagnant.

He also examined the construction industry in particular to see if the change in long-term unemployed construction workers’ employment has been any different than changes for long-term unemployed workers in other industries. When he looked at the data, he found few differences. This rebukes the idea that long-term unemployed construction workers have been unable to reenter the labor force due to a mismatch in skills.

Dean Baker, the Co-Director of the Center for Economic and Policy Research, added an additional layer to Diamond’s argument, noting that the Beveridge Curve has shifted upwards only for the long-term unemployed, not for the short-term unemployed. This is evidence that there was not a structural employment problem for the long-term unemployed when they were part of the short-term unemployed. The issue began when they became part of the long-term unemployed.

The final panelist, AEI’s Kevin Hassett, focused almost entirely on the problems of those workers.

“When you create a stock of folks who have been unemployed for a long time, then it makes it uniquely difficult to reattach them to the labor market,” he said. “There’s been insufficient attention to the emergency of the long-term unemployed.”

Hassett joked that he’d received a surprising amount of praise from liberal organizations recently for his promotion of government jobs programs to help those workers. Yet, even Hassett in conjunction with liberal economists has been unable to convince policymakers to implement such a program. This, he noted, is devastating to those workers, who see significant negative effects on health and wages due to their long-term unemployment. For those reasons, this is a problem that Congress cannot kick down the road.

The longer we wait to confront this pressing issue, the worse it will become. Unfortunately, the lack of interest from Congress may mean it will get much worse.

Does Obama Lack the Leadership Skills in Syria?

Danny Vinik Leave a comment

One of the most common criticisms of President Obama is that he doesn’t have the leadership skills to persuade legislators to support his agenda. The theory goes that if Obama were friendly to Congressmen or reached across the aisle more, Republicans would suddenly drop their obstructionism and work with him. Commentators on the left and right love to ding the President for this, but it’s almost comically untrue. Presidential leadership is a myth. The bully pulpit is vastly overrated and no matter what Obama does, Republicans are going to oppose it. No number of meetings, dinners or visits to Capitol Hill will change that.

This theory has come up yet again with the Obama Administration’s inability to convince Congressmen, particularly in the House, to support a strike in Syria. The Washington Post‘s Matt Miller articulated his six qualms about Syria today. Here’s number five:

The leadership question. In recent days, several business leaders in Los Angeles who voted for Obama twice have told me, unprompted, that the Syrian episode captures everything they can’t stand about the president. He lacks basic leadership skills, they say. Too much detailed public analysis and hemming and hawing, says one. No real engagement with his counterparts, says another, and so no reservoir of good will with either foreign leaders or with exotic species like Republicans. When Obama himself seems to lack conviction in his proposed course of action, they wonder, how will he persevere when any military step brings the inevitable complications?

Matt Lewis, of the Daily Caller, echoed a similar sentiment this morning:

Some people seem surprised the votes just aren’t there for Syrian intervention. I’m not. Call it the Vietnam syndrome redux, but after a decade of war, Americans are understandably war weary. Thus, the only way way to overcome this difficult obstacle would be to have a). an ironclad case for war, and b). a president who uses personal relationships to twist arms.

In this regard, he’s 0-for-2.

…

Still, absent a “slam dunk” case for intervention, personally persuading Members of Congress to vote for bombing Syria (in this environment) would require some elbow grease. For years, Obama has been criticized for failing to develop relationships with Members of Congress. Until now, he has mostly (miraculously) skated on this. But one gets the sense that it has finally caught up with him.

So, assuming that President Obama isn’t intentionally tanking the rollout for the strike because he secretly doesn’t want to go to war, how much is a lack of presidential leadership to blame for the lack of support? There’s no doubt that President Obama and Secretary of State John Kerry have done a poor job selling the war to the American people (yes, firing missiles at a country is an act of war). But, if they had explained it well, how much would public opinion be different? Likely not much. The American public adamantly is against the strike. A number of House members have reported overwhelming opposition from their constituents. This isn’t a close public opinion battle that a better White House strategy could have swayed. It’s a major uphill fight.

That doesn’t mean the President has done an acceptable job here. He hasn’t. He switched from taking unilateral action to asking for Congress’s approval at the last second . The Administration asked for an absurdly broad force authorization. Secretary Kerry fumbled questions in Congress. It’s been a mess. But once again, commentators are overstating the value of the bully pulpit. President Obama can continue to condemn the chemical weapon attack and argue that the international community must respond. But, Americans are war-weary. He can only change public opinion so much.

As for his relationships on Capitol Hill, that has been overrated too. This is a major decision and legislators are listening to their constituents on it (see Justin Amash’s twitter account for instance). If Obama can’t sway public opinion in his favor (and I don’t think he can), then twisting the arms of Congressmen is highly unlikely to work too.

The President has done a poor job leading and arguing for this Syrian strike, but even if he passionately laid out the evidence for an attack, he would’ve had trouble convincing the American people. There are rumors that the President will make a national address this week to push for the strike. For those who believe in the power of presidential leadership, this will be a test of the bully pulpit. Don’t get your hopes up of it having any major effect though.

Obama Should Not Be Embarrassed if the Syria Resolution Fails

Danny Vinik 2 Comments

There’s been a widespread assumption in the media that if Congress does not approve of the force authorization in Syria, it will be a major embarrassment for President Obama. The New York Times called it “one of the riskiest gambles of his presidency.” A McClatchy article on the topic was titled “Obama risks embarrassing loss in Congress.” The Financial Times published a piece titled “Barack Obama risks more than just his credibility on Syria.” It’s easy to find more examples.

But this line of thinking is not just dead wrong, it’s also damaging to our democracy.

President Obama and future presidents should not think that consulting Congress is a risky proposition. They should not think that a defeat in Congress would be a huge embarrassment to their administration. It’s vital that the executive branch consult with the legislative branch before going to war. That’s how democracy works. It’s a system of checks and balances.

And contrary to President Obama’s comments, that system of checks and balances extends to war-making authority as well. Obama is wrong when he says he has the unilateral authority to strike Syria. We’ve grown accustomed to presidents seizing that power, but the fact of the matter is that except under extreme circumstances where the national security of the United States is at risk, only Congress has the power to declare war. This isn’t an extreme circumstance. President Obama is following the Constitution by asking Congress for approval.

That’s what makes articles like the ones I listed above so dangerous. They are a self-fulfilling prophecy. A defeat in Congress is only embarrassing for the President, because the media has framed it that way. The Atlantic’s Conor Friedersdorf had an excellent post yesterday that outlined how perverse this thinking is:

If you’re someone who personalizes politics, fetishizes disagreement, and intends to treat a Congressional rejection of a strike on Syria as a “humiliation” for Obama, the Times frame makes some sense, but make no mistake: Its assessment of the Syria debate’s impact is self-fulfilling prophecy from an insular, status-obsessed elite. Obama’s approach is “a gamble” because and only because other insiders imagine that a president being denied by Congress — gasp! — is embarrassing, rather than a healthy manifestation of Madisonian checks.

The executive is more prone to war than the legislature or the people. This was foreseen.

This is even more dangerous, because it sends a message to future presidents that consulting with Congress (and abiding by the Constitution) is a major risk that can derail an entire presidency. We don’t know how the current vote will turn out, but if Congress does not pass the resolution and the media treats it as a massive disgrace to the President, it will be a grave disservice to our country. Hopefully, future administrations will follow the Constitution and consult Congress. But the past couple of Presidents have demonstrated that they don’t always think they need Congress’s approval to wage war. Will a future President ever go to Congress again if he (or she) knows that rejection will be a black mark on his (or her) presidency and derail his (or her) entire agenda?

If Congress rejects the authorization, we should treat it as a victory for democracy, not a failure of the presidency. That would signal to future presidents that asking Congress for permission to wage war is not a major gamble. Framing it otherwise only incentivizes them to find a way around the system of checks and balances.

Is that really the framework the media intends to promote? I hope not.