As posted to this blog at Economist's View.
I believe there would be a way to bring unemployment down to previously usual levels like 4-5% along with previous levels of labor force participation (the real measure, since "unemployed" people are still looking for work, and after awhile they will find other arrangements). But I also believe it will not happen with any kind of status quo thinking. It will require even greater use of government than during the New Deal. The 2nd wave of old capitalism has now hit the rocks. Now everyone possible needs to be put to work on building a new sustainable economy based on renewable energy and other sustainable practices. Capitalism won't go there, so we must abandon capitalism. Hopefully we can do so without going Stalin, but if takes 30 years because of resistance from the plutocracy, I expect we will see Stalin again, and the people will cheer him on.
The only thing that has kept the US economy going since the 1980's after Reaganomics kicked in fully has been speculative bubbles, first in banking, then in dot-com technology, and then in housing. But now, credit levels (mainly private) and claims on future production have grown to astronomical heights. It simply isn't possible to play the same old shell games anymore. And even if we do, it simply defers the collapse a few more years. The problem is we've been running on fumes since around 1980.
Something has changed. The cliff is now clearly in view. Oil production has been nearly unchanged since 2005, after decades of exponential growth, and the climate consequences of burning everything we got is beginning to come right back at us, and those are just two examples.
We actually passed the limits of resource utilization and waste dumping in the period 1970-1980. Sooner or later we will have to get back to those levels, or less to make up for what we have borrowed in the interim.
But lack of continued economic growth does not mean that people need to go unemployed. There is another kind of solution.