Somethings in life are difficult to figure out, but identifying this little economic problem shouldn’t have been one of them. From the Krugman (boldface mine):

One question that arises when we talk about the possibility of reversing the disastrous push for austerity runs something like this: “OK, you say you want more government spending, but what should it spend money on?” The truth is that I think the perceived lack of shovel-ready projects was overstated even in 2009, but it was a real concern.

The point I want to make is that matters now are actually a lot easier: we could get a fairly big fiscal bang just by resuming aid to state and local governments, allowing them to reverse the big cuts they have recently made….

This suggests to me that we could put well over a million people to work directly, and probably around 3 million once you take other effects into account, without any need to come up with new projects; just transfer enough money to state and local governments to let them return to doing the essential business of government, like educating our children.

I also said we should use federal funding to make of local and state revenue shortfalls. In May. Of 2008:

What would help is if the $300-$1200 per household were split between the municipality and the state in which that household resides [instead of being given as a social security tax refund].

Most local and state governments are suffering from budget shortfalls due to property tax revenue decreases and lower sales tax revenues. Most also have outstanding deferred maintenance problems. If given the money, they will spend it–all of it.

Here’s the thing: I didn’t have to be WICKED SMAHT! to figure this out. All you had to do was pay attention, the shortfall was already happening before the November election. So how did I get this (other than by reading a newspaper) when most others didn’t? It’s pretty simple: I think unemployment along with policies that don’t emphasize full employment or livable wages are awful and underlie many massive social problems (including poor educational performance). We need to fix those things. Hell, in many parts of the country, we have needed to fix those things for a long time.

Charles Pierce always writes, “Fk the deficit. People got no jobs, got no money.” Well, to me, the key macroeconomic indicators are wages and employment, other concerns are secondary (and some wage inflation, given that wages have declined ten percent over the last decade would be a good thing). The other economic indicators are secondary. Maybe if more economists had to function in a labor market similar to other workers, this might be more apparent?