Do Keynesian Economists Need to Put Down That Crack Pipe?

David Stockman reports:

Due to the structural failures of the US economy owing to decades of destructive Washington policies, the “unemployment rate” today is not remotely comparable to what was being measured in the 1950s and 1960s when today’s Keynesian theology with respect to the Phillips Curve, Okun’s Law and full-employment policy was being formulated.

Today there are 102 million adults not holding jobs, for example, but only 43 million of these are retired on OASI (social security) and just 11 million are counted as officially unemployed. At the same time, there are upwards of 40 million part-time job holders, which self-evidently represent additional unutilized potential labor hours. So there are upwards of 100 million adults in America who represent a massive but latent labor supply that makes a mockery of the silly “U-3″ unemployment ratio that the Eccles Building theologians insist on counting down to the decimal points.

Stated differently, the BLS recently revealed that the private business sector of the US economy generated 194 billion labor hours in 2013—the exact same number as way back in 1998 and notwithstanding the massive growth of the adult population in the interim. Indeed, as recently as 2000, there were only 75 million adults (16-years and over) not holding jobs. Yet of the 27 million gain since then, only 7 million entered the OASI rolls. This means that during a 14 years period in which there was no growth of aggregate labor hours in the business economy, 20 million more adults ended up in the safety net, in mom and dad’s basement or on the streets.

These realities are not a mystery, and they do reflect a dangerous fiscal and social policy breakdown. But they are also thumping proof that monetary policy has exactly nothing to do with employment conditions and job creation. During the last 15 years, the Fed engaged in massive and nearly continuous Keynesian stimulus maneuvers, expanding it balance sheet 8X from $500 billion to $4.3 trillion.

Another great one from David Stockman.