By Dave Anderson:
El-Erian also confirmed for me that he reckons a 7% Nairu �sounds reasonable� � well above the 4.8%-5% that the Fed seems to be using.
Determinations of Nairu are always more of an art than a science, but it does seem reasonable to assume that the reasons El-Erian outlines would bring it up. In turn, that�s going to raise problems for right-leaning economists and politicians, who are going to find it harder to extol the abilities of the free market to find employment for all, and thereby dismiss claims that we need to provide a robust social safety net for the millions of Americans who can�t find jobs.
I think Salmon is over-estimating the political problem of conservatives opposing safety net spending --- it could go to "those people" or at least to the lazy, shiftless and undeserving poor instead of people who are out of work and out of options because of shit luck that they could not control short of being smart enough to either be born with the right parents decades ago or complete prescience in career and geographic choices. Providing any support to people out of work for structural reasons might mean taxes would go up --- can't have that at all. [/GOP Senate statements]
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