Revising Policy Assumptions in the Wake of The Great Recession

Sherle R. SchwenningerOctober 26, 2010

The Need for Full Employment

• Full employment is the best guarantee of economic security and economic opportunity.

• In order to restore the economy to full employment by 2016 we need to create more than 19 million jobs.

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Policy Produced a Jobless and Unsustainable Recovery

Monetary reflationAsset reflation, financial sector profits, and the return of global trade imbalances

Tax cuts, “cash for clunkers,” and unemployment insurance

(Temporary) support of consumer spending

Modest infrastructure and public works spending

Weak job creation and stagnant wages

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Why Policy Won’t Deliver Full Employment

• Over-reliance on monetary policy.

• Shortcomings of general demand stimulation.

 • Private sector job machine is

“broken.”4

A Growth and Jobs Creation Agenda

• Substantial public/private investment in infrastructure.

 • Expansion of public services. • Pro-growth industrial policy.

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