Audit D.C. Notes: Crook on Broken Labour Markets, Bartlett Notices That We’re Getting Old, WSJ Notices Fannie and Freddie

We’ve been complaining that the long-term unemployment problem isn’t getting enough attention from the business press. But Clive Crook’s latest FT column takes note of the “startling” increase, and what it means that it’s reached “levels previously associated with Europe’s broken labour markets.”

Short answer: not good.

Crook cites a study for the Brookings Institution by University of Michigan economist Michael Elsby and others showing that “the deterioration of the US jobs market during this recession has been the worst for more than 60 years.” (He doesn’t provide a link, but I found a March draft of the report here.)

This time, as in previous recessions, US unemployment inflows rose somewhat at the start of the recession – though with an unusually pronounced shift from people quitting to layoffs. More important, though, subsequent rates of hiring have not just declined, they have crashed. This is new. This is why long-term unemployment has soared, and why the US is looking more European – in a bad way.

Mr Elsby and his co-authors point out that, even with this dramatic slow-down in hiring compared with previous US recessions, unemployed Americans still find new jobs a lot faster than their counterparts in most of Europe. But the gap has narrowed – casting doubt on the rule that says, “the sharper the downturn, the faster the recovery”.

Told ya. It’s not good. But good for Crook for writing about it.

—At Capital Gains and Games, Bruce Bartlett takes a look at a couple of Census reports and what he smartly identifies as the political impact of our aging society.

While one study shows that the number of people 65 and over is projected to rise by 14.5 million, to 16.1 percent of the population, by 2020, the other, based on voting in the 2008 election, found that the older someone is, the more likely they are to vote.

The Census Bureau estimates that the odds that someone voted were twice as high for someone aged 45 to 64 as for someone 18 to 24, and more than three times as high for someone 65 or older.

In short, what we see is that over the next ten years the percentage of the population that benefits from Social Security and Medicare is going to rise significantly and that this group of the population votes in higher percentages than those that pay for these programs. And those that will, over their lifetimes, bear the heaviest burden of paying for entitlement programs—the young—vote at the lowest rate of any age group.

Bartlett wonders where those pols who want to cut entitlements to balance the budget think they’ll get the votes. I wonder if the story is getting enough attention, and voters realize what’s at stake.

—As The Audit’s Ryan Chittum, the “Oracle of Tulsa,” has pointed out, the business press is still sorting out the financial reform legislation. The Wall Street Journal brings us up to date on Fannie Mae and Freddie Mac, which have hovered below the radar and, so far, are getting the “hands-off approach.”

Fannie and Freddie are hot potatoes, as the piece points out, and too often bogged down in partisan politics. The two are playing “a bigger role in the housing market today than before the bust,” and the White House doesn’t want to deal with them until markets stabilize. Republicans would like to scrap them, though, as the story notes, their amendment to wind them down, defeated during the fin reg debate, “didn’t specify what would take their place.”

But clearly, this is an issue that isn’t going away.

The mortgage-finance giants that are now wards of the government, are on their way to becoming the single-biggest cost to taxpayers from the financial crisis—ahead of the banks, auto makers, or even insurer American International Group.

That doesn’t mean it’s urgent.

“The administration has put it on the ‘too hard’ pile,” says David Felt, a former senior lawyer at the companies’ federal regulator who presided over the government takeover of the companies in 2008.
Oh, right, the “too hard” pile. Let’s remember to check back on that.

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Holly Yeager is CJR's Peterson Fellow, covering fiscal and economic policy. She is based in Washington and reachable at