Indecisive Economic Leaders, Undecided Near Future

I like Paul Krugman, largely because he seems to have an explanation for what's going to happen that is more accurate than anyone else's. Most economists are great at coming up with reasons why things have already happened, and that doesn't do me as much good. Besides, his thoughts don't depend as much on the assumption that people are rational!

I have been wondering which in fact is better: emphasizing deficit cutting or increasing jobs by spending more. Here is his take on what is GOING TO HAPPEN based on the recent G20 meeting of major economic powers, who have collectively pledged to cut their deficits in HALF by 2013. This looks like a pledge that is somewhere between Crazy and Impossible. Has any non-totalitarian government ever come close to a performance like that before? No way.

I was optimistic earlier this year about the economy continuing to improve, but we have seen a serious failure as far as placing stimulus spending into circulation such that jobs will actually be created, so the Krugman "government spending = jobs" chemistry lacks the proper catalyst. Perhaps as projects wend their way through supposedly "fast-tracked" permit processes, we will see an improvement in the job outlook upon which all else depends.

NPR had an economist on a couple of days ago talking about how the jobs outlook must be good because it is led by increases in overtime wages, which we are now seeing.

Another interesting consideration is, what effect might there be of the refusal by Congress to extend unemployment "benefits?" Will this really spur people to "go out and look for jobs," if their not looking is really the issue (people getting $400 a week after getting twice that much at a job - I'm suspicious about whether it's really laziness that's keeping people at home). I know for a fact that in some cases people can do unreported side work while living off measly unemployment benefits, but I really don't think it's the norm.

So now I'm less confident about the second half of this year. We are seeing increased interest in our advertised vacancies across the board, even at smaller units that have been feeling serious pain for months now. I do expect a moderate improvement in employment numbers, and I expect this to propel a slow, cautious recovery. We can't trust the people in charge - in either party - because the people to whom they are all beholden are just too different from us.