I’ve been saying all along that Obama’s economic policy was heavily influenced by the apparent high productivity growth figures (see my lengthy post from March 2011 here ). However, I didn’t realize that the problem stemmed directly from the President. According to Ron Suskind’s new book (taking the excerpt from Brad DeLong’s blog), Obama’s advisers were distressed that the President appeared to believe that high productivity growth was the main cause of high unemployment.
If Obama felt that 10 percent unemployment was the product of sound, productivity-driven decisions by American business, then short-term government measures to spur hiring were not only futile but unwise .
This explains an awful lot about the Administration’s unwillingness to tackle the job problem. What makes this a tragedy is that much of the measured productivity ‘gains’ are actually driven by shifts to lower-cost suppliers overseas (see here).