WWS 594, Feb. 15

PK

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

1929

1932

1935

1938

1941

1944

1947

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

Ratio of transfers to personal income

In a December 2011 op-ed, former Massachusetts Governor Mitt Romney warned ominously of the dangers that the nation faces from the encroachment of the “Entitlement Society,” predicting that in a few years, “we will have created a society that contains a sizable contingent of long-term jobless, dependent on government benefits for survival.” “Government dependency,” he wrote, “can only foster passivity and sloth.” Similarly, former senator Rick Santorum said that recent expansions in the “reach of government” and the spending behind them are “systematically destroying the work ethic.”

Rising vacancies (blue, inverted on right scale) didn’t immediately translate into Lower unemployment

Unemployment

Inflation The policy context: crude analysis

Phillips curve

Inflation target

Normal situation

Worsened tradeoff leads to higher U

Unemployment

Inflation

Phillips curve

Inflation target

Demand-determined unemployment

Inflation is below target, shift makes it less below, but has no effect on U

Current situation?