CBO Says Weak Demand Is Causing High Unemployment

CBO Says Weak Demand Is Causing High Unemployment

CBO Says Weak Demand Is Causing High Unemployment

Moneybox
A blog about business and economics.
Feb. 17 2012 1:50 PM

CBO Says Weak Demand Is Causing High Unemployment

Doug Elmendorf, on the CBOBlog: "Slack demand for goods and services (that is, slack aggregate demand) is the primary reason for the persistently high levels of unemployment and long-term unemployment observed today, in CBO’s judgment."

This is correct. Strangely the subsequent discussion completely neglects monetary policy as relevant to demand. The Federal Reserve is supposed to conduct monetary policy independently, but that doesn't mean that other arms of government are supposed to pretend it's not there.