David Brooks on Wisconsin: Flaunting Ignorance of Economics
|Tuesday, 22 February 2011 05:38|
Let's all have a hearty round of laughter at David Brooks' expense. He doesn't know that employer side payments for benefits like pensions and health care come out of workers' wages. In his column today, he tells his readers that public employees in Wisconsin should have to pay for these benefits just like private sector. Apparently he doesn't know that they already do.
Go into any economics department and tell the faculty that you think employers should have to pay more for workers' Social Security benefits. The ridicule with which that suggestion would be greeted should be heaped on Mr. Brooks for failing to understand basic economics. And of course, we actually have data that show that the higher benefits received by public sector workers in Wisconsin are more than fully offset by lower pay.
Of course the bigger mistake in Brooks' column is the assertion that we are looking at a decade of austerity. This may prove true, but this is a policy choice. We had unbelievably incompetent economic policy in the last decade. The Fed and the Bush administration allowed (arguably encouraged) the growth of an $8 trillion housing bubble. It was fully predictable that it would collapse and lead to a serious recession.
Unfortunately, economic policy continues to be guided by people who were too incompetent to recognize this bubble and the danger it posed. The route out of this downturn is simple: the government needs to spend money to create demand. This is the economy's problem at the moment, not a scarcity of resources. However, the incompetents control the debate and are now promising us a decade of austerity rather than taking the simple steps that would be needed to get back to full employment.