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November 21, 2009


Ken Houghton

This is what happens when economists get involved; they forget that "transaction costs" aren't just something you can assume away.

Hire on the Federal level. In fact, hire on the Federal level not just those rebuilding/landscaping/Infrastructure jobs (which will cost more) but also the people who have been downsized from the Financial and other firms who have been doing Process Re-engineering and let them look at how to shrink government.

In 2000-2001, it was common knowledge that Government employment was going to be down 30% by the end of the decade, i.e., next year.

Then alone came W, and payrolls and headcounts, instead of being reduced, soared. Efficient programs--the VA re-engineering begun under Clinton--were made worse. Improvements in other areas were tabled.

Bring them back, and use the private sector slack to do it. The great thing is that the result will be self-enabling: people will work their ways out of a job just about the time the private sector starts hiring again--2012-2013.

Ignore the "tax credit" idea; it doesn't create anything, since it won't be greater than the transaction costs of hiring, using, and firing. (If it were, better to literally put the people on the dole and take out the middleman.) At best, it creates a greater level of frictional unemployment when the economy recovers. (I mean a real recovery, not the proverbial "jobless recovery.")

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