>In this context, I would like to make clear that I do not view as ideal
>the U.S. model where the burden of recessions tends to fall heavily on the
>shoulders of workers, who may be obliged to move across regions and
>industries in response to the business cycle. How to deal with the reality
>of the business cycle is an area where Europe--with its tradition of
>social safety nets--and the United States--with its tradition of flexible
>work arrangements--can perhaps learn something from each other. To date,
>neither of us seems yet to have found the optimal way to cope with the
>unavoidable reality of the business cycle to enable us to avoid both high
>unemployment rates and too skewed a distribution of income.
Another revealing remark in the reflectful
>Remarks by
>
>William J. McDonough President Federal Reserve Bank of New York
>
>before the
>
>Association of German Mortgage Banks
>
>Frankfurt, Germany
>
>November 17, 1997
Best compromise IMO is the conversion of unemployment benefits to a positive tax credit. The hurdles against implementation are substantial as unions would oppose it, fearing it as a recipe for wage cuts, and fear its repeated erosion by inflation, without the government raising the level regularly. Nevertheless the UK government is beginning to introduce postive tax credits for unmarried mothers.
In terms of political economy interestingly positive tax credits starts to erode the identity of the proletariat as having nothing to sell but their labour power. It could therefore be a technical measure on the road to communism.
It is interesting too that he seems to suggest that a progressive income tax is one of the features of US financial stability.
http://www.newyorkfed.org/pihome/news/speeches/sp971117.html
Chris Burford
London