Faced with a sharp rise in unemployment since 2008, the Con-Lib government in Britain has diagnosed an epidemic of laziness, and announced measures to push the “work-shy” back into jobs. In particular, they’ve announced that those deemed not to be looking hard enough for work will be forced to undertake unpaid part-time work for community organizations.

Stripped of the punitive rhetoric, this is a cut down job-creation scheme, partly paid for by the unpaid labor of the participants. It’s hard enough to make job creation work well as a counter to unemployment, without adding in this kind of thing.

Australia has been there and done that. Following the discovery in the late 1990s that it played well with focus groups, John Howard (conservative PM) introduced a program explicitly called Work for the Dole and targeted initially at the young unemployed. It was a political success, but didn’t have any evident effects on unemployment. This evaluation of Work for the Dole and other programs suggests that it performed much less well than the explicit job creation and wage subsidy programs it replaced. Strikingly, given that the UK government is supposed to be on an austerity drive, the cost in the late 1990s was $2000-3000 per participant (around 1000 stg), on top of the benefit payment for which they were working.

But at least Howard’s moves came quite a few years into an expansion when it could credibly be claimed that there were jobs available for people willing to look hard enough. For a government that is busy creating unemployment to start attacking the “work-shy” requires a truly impressive level of hypocrisy.

The US Federal Reserve has announced its long-awaited renewal of quantitative easing (cutely labelled QE2). It’s $600 billion of new money to buy US Treasury notes with an average duration of five years, along with recycling of some money from the mortgage bailouts, also into T-note purchases. That sounds like a lot, but the reaction from Brad DeLong (endorsed by Paul Krugman) has been a big yawn. With the five-year bond rate at just over 1 per cent, the amount the private sector would demand to hold these bonds (that is, the annual interest payment) is about $7 billion, which is rounding error in the context of the current crisis.

I had been thinking that the Fed might take the much riskier (and politically trickier) step of buying corporate bonds. That would seem more likely to promote investment, but would obviously involve a good deal of winner-picking, with the associated potential for (real or perceived) corruption.

But what is really needed here is fiscal stimulus focused on job creation, combined with a long-term plan for fiscal consolidation (that is, higher taxes and/or lower expenditure). Instead, what the US appears likely to get is a permanent tax cut for the rich, partly offset by lots of job-destroying nickel-and-dime cuts in current expenditure. Many of these cuts will prove to be counterproductive or unsustainable in the long run.

One reason I’m thinking a fair bit about the long term future is that immediate prospects look grim, particularly in the US.

According to this piece from the NY Times on Obama’s post-election plan

After two years of operating at loggerheads with Republicans, Mr. Obama and his aides are planning a post-election agenda for a very different political climate. They see potential for bipartisan cooperation on reducing the deficit, passing stalled free-trade pacts and revamping the education bill known as No Child Left Behind — work that Arne Duncan, Mr. Obama’s education secretary, says could go a long way toward repairing “the current state of anger and animosity.”

Translation: Mr Obama and his aides plan a series of pre-emptive capitulations, after which the Republicans will demand the repeal of the healthcare act (or maybe abolition of Social Security). When/if that is refused, the Repugs will shut down the government, and this time they will hold their nerve until Obama folds.

BTW, the only thing I knew about Arne Duncan before this was that he was a fair country (ie Australian NBL) basketball player. But reading his bio (corporate-style charter school booster, fan of incentives based on standardised tests etc) along with the fact that he’s in close with Obama is indicative of why things have gone so badly in this administration.