Back last Spring it became increasingly apparent that one intention of the Republican-led obstruction of any and all measures designed to boost the economy and help working people was to thwart the recovery — and blame President Obama and Congressional Democrats.
Well, they’ve certainly thrown sand in the gears of any nascent recovery — one reason we’re still stuck with debilitating unemployment, a massive foreclosure debacle and a private sector that remains in a virtual hiring gridlock.
So, as we set out to our polling places to vote Nov. 2, it’s useful to recall just what’s been going on the past several months in particular, starting, of course, with the infamous obstruction of unemployment benefits last February by Sen. Jim Bunning (R-KY). Those antics were repeated the following month by Sen. Tom Coburn (R-OK), setting up another short-term emergency stop-gap measure that finally extended the unemployment programs through May.
That’s when the Senate Republican leadership joined the full-scale obstruction effort, putting the nation and the economy at a dangerous crossroads. Having successfully pressured a small number of House Democrats to join the effort to cut out core components of a job-creation and unemployment insurance extension measure, the Republicans set their sights on imposing sado-economic austerity.
In the process, they succeeded in stalling another unemployment extension — having already eliminated the federal COBRA health insurance subsidy and the extra $25 a week for the unemployed. This while preserving tax breaks for hedge fund managers and overseas investment schemes, as well as subsidies for their Big Oil buddies.
The result of that summer obstruction — a two-month battle just to pass another continuation of emergency unemployment benefits, something that, in the past, both parties had always done when unemployment was elevated — was a seven-week lapse in benefits for long-term unemployed workers. 2.5 million went without benefits during that lapse.
The economy suffered. Millions of working people, small businesses, unemployed workers and their families — all suffered. And the obstructionists laughed smugly amongst themselves, knowing that the continued economic hardship could be used for their own political gain.
Obstruct, delay, cut or defeat any attempts to improve the economic conditions of working families. That was — and is — their goal. For cynical political gain. As a result, they’ve torpedoed jobs, torpedoed the recovery for working people.
On my way to the polls, I’ll have one thing in mind: Damn the Torpedoers.
The only surefire ways for policymakers to substantially increase aggregate demand in the short run are for the government to spend more and tax less. In my view, we should be moving forward on both fronts….
…concern about the deficit cannot be an excuse for leaving unemployed workers to suffer. We have tools that would bring unemployment down without worsening our long-run fiscal outlook, if we can only find the will and the wisdom to use them….
Much of her speech details the ways in which the Great Recession has differed from prior U.S. recessions, something we examined back in January in a post titled “Do You Believe in Magic?”
Romer is returning to UC Berkeley to assume her former post as a professor of economics.
She has been perhaps the clearest advocate in the administration for the benefits of fiscal stimulus and the need for additional policy action. But her departure does not necessarily signal a pull back by the White House from pursuing a bolder focus on new initiatives to boost jobs and the economy.
To the contrary, as President Obama has recently said the administration is working on “additional measures” as part of “a full-scale effort, a full-scale attack” to get jobless workers back to work and sustain a real economic recovery.
The question of who is chosen to fill the Council of Economic Advisers (CEA) post may well be one of the critical components determining just how “full-scale” those “additional measures” will be.
In that context, yet another UC Berkeley economics professor comes to mind. Laura Tyson, a senior fellow with the Center for American Progress, and a member of the Economic Recovery Advisory Board, served as the Chair of CEA from 1993 to 1995 in the Clinton administration.
But the primary reason Tyson comes to mind is her Op-Ed in last Sunday’s New York Times, titled “Why We Need a Second Stimulus”:
OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.
The primary cause of the labor market crisis is a collapse in private demand — the same problem that bedeviled the economy in the 1930s.
In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.
[...]
Under these circumstances, the economic case for additional government spending and tax relief is compelling.
The author is the winner of the 2010 CREDO Mobile/Netroots Nation award for Blog Activist of the Year.
“These days, debt-fueled government spending doesn’t increase confidence. It destroys it.” – David Brooks, July 6, New York Times
“Not since World War II has an economic recovery been so hobbled by poor confidence.” – Robert J. Samuelson, June 12, Newsweek
“I also think the confidence issue is key. Public debt is now one of the top national concerns. If we spend the next few years making deficits worse than they are now, the national mood will plummet, and business people will definitely not gain the certainty and predictability they are hungering for.” – David Brooks (again), July 7, NYTimes.com
Get ready to hear the dumbest arguments yet against effective measures to bolster a recovery, address the unemployment crisis and spur economic growth. The Confidence Men are on the loose.
These self-appointed Keepers of the Flame of Conventional Wisdom are spreading a certain European contagion, an irrational exuberance for austerity that’s been noted frequently by economist Paul Krugman:
But don’t worry: spending cuts may hurt, but the confidence fairy will take away the pain. “The idea that austerity measures could trigger stagnation is incorrect,” declared Jean-Claude Trichet, the president of the European Central Bank, in a recent interview. Why? Because “confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”
Also on a tear, unfortunately, is the aforementioned European Central Bank president, Jean-Claude Trichet who comes at us again today from his alternate universe:
European Central Bank President Jean-Claude Trichet on Friday stepped up his warnings to governments to reduce their borrowing before they lose the confidence of electorates and financial markets.
“Many countries in the industrialized world have reached the limits of fiscal expansion,” Mr. Trichet told a central banking conference. “Fiscal authorities need to look beyond the current cyclical upturn. There is no alternative to that.”
The central bank president has repeatedly argued that persistent budget deficits undermine public confidence, causing more precautionary saving and unnecessarily weakening demand.
In Mr. Trichet’s mental universe we’re now in a “cyclical upturn”, but demand is being hampered by a lack of confidence. In the view of this cut-spending-reduce-deficits-throw-the-stimulus-into-reverse-now crowd, businesses will snap-to and unleash a torrent of job-expansion investments once they have imbibed the magic elixer of confidence. But they’re abstaining until government spending is cut, deficits are reduced, austerity reigns, and additional pain and suffering are imposed on the lower classes.
When Congress reconvenes next week we’ll undoubtedly be treated to a constant chorus by the likes of Republican Senators Mitch McConnell, Jon Kyl, Judd Gregg and John Cornyn et al. repeating the refrain that we can’t extend unemployment insurance and we can’t help states with Medicaid support, or anything else because government spending is increasing the deficit, and the deficit is undermining the recovery, keeping businesses from hiring more workers, and growing so rapidly there’s the threat of public debt default (the “we are Greece” line). The austerity caucus — the Confidence Men — will argue, quite incredibly with straight faces throughout, that only by making the “tough choices now” to cut spending for things like unemployment insurance, Medicaid and support for state and local governments can we “restore confidence” (blah, blah, blah).
The anti-spending, deficit-reduction push is not motivated by a real desire to restore economic growth. Nor is it driven by a real desire to reduce deficits. To the contrary — politically, the Republicans would prefer a faltering economy, thinking they will benefit at the polls in November if they can help steer the economy back into the ditch. And the austerity they promote would more likely only add to the deficits.
But let’s go back to the assertions that the deficit is undermining the recovery, keeping businesses from hiring more workers, and growing so rapidly there’s the threat of public debt default.
What’s undermining the recovery is a combination of key factors, starting with the persistence of depressed aggregate demand and high unemployment. Add to that a sluggish private sector and anemic jobs growth. Making matters worse is the simultaneous winding down of the 2009 Recovery Act stimulus, the obstruction of unemployment benefits and every other program to help workers struggling to get through the recession, and the stubborn lack of bold jobs policy initiatives from the
White House.
So what’s keeping businesses from expanding and hiring more people? Do you think corporate executives and business owners are actually sitting around saying, “Gee, I’d love to expand and hire more people, but the federal deficit is really crimping my confidence”? Please. As they say, it’s the economy, stupid. As Paul Krugman writes in his column today:
… there are widespread claims that fears about taxes, regulation and budget deficits are holding down business spending and blocking economic recovery.
How much truth is there to these claims? None. Business spending is indeed low, but no lower than one would have expected given widespread overcapacity and weak consumer spending. Business leaders are feeling unloved, but giving them a group hug won’t cure what ails the economy.
If we want stronger business spending, we need to give businesses a reason to spend. And to do that, the government needs to start doing more, not less, to promote overall economic recovery.
Exactly. What is it that causes businesses to invest and spend to expand and hire? First and foremost is increased demand for their goods and services, as well as the availability of affordable credit. But also, there needs to be competition for those goods and services, so that businesses are motivated by wanting to not get left behind. And lastly, there must be increased demand and competition for labor. It’s the depressed demand for goods and services as well as labor that is still stifling growth. And only robust, sustained growth will allow debt-to-GDP ratios and deficits to improve.
So, what of the assertion by the Confidence Men that current short-term deficits are causing some imminent threat of a U.S. debt crisis, or even default? While some of the weaker economies of smaller nations are experiencing problematic debt issues, the simple fact is that the U.S. is not. The market for U.S. Treasuries continues to be robust, even as yields remain markedly low. The benchmark 10-year rate has remained about 3 percent, which means the U.S. is readily able to borrow at very low interest.
So, if none of the economic assertions promoted by the Confidence Men hold any water, what might be said of their assertion that austerity-imposition and spending-reduction would at least have the benefit of producing some increased sense of business confidence? Well, not much:
French Business Confidence Declines on Budget Cuts
French business confidence declined for a third month in June on concern that budget cuts across Europe may slow consumer demand.
The Bank of France said today that the country’s economy will expanded about 0.4 percent in the second quarter, compared with a previous forecast of 0.5 percent.
The Confidence Men are engaged in a confidence game, pure and simple. They have no real interest in either spurring economic recovery or addressing fiscal deficits. What they do want to do is attack all the social safety-net programs, from unemployment insurance and Medicaid to food stamps, Medicare and Social Security, not to mention public education.
Whatever you may hear from conservative pundits pretending to be economists, or from paid lobbyists pretending to be economists, there truly is a consensus among serious economists that the stimulus provided by last year’s Recovery Act was essential to stabilizing the economy and preventing even more severe job losses. More importantly, the consensus among economists is that the stimulus was not large enough to provide positive traction on job creation and that more jobs stimulus is now needed. A lot more.
That this consensus is not yet an accepted fact of political and economic reality is the result of the totally fake deficit fear-mongering promulgated by those who want to maintain their supremacy over working people — employed, unemployed or underemployed — in this country.
Let me say it: there won’t be a real economic recovery without substantial, continuous job growth.
And there won’t be substantial job growth without an additional array of targeted job-creation programs — ones that finally are no longer too small to succeed.
So, let’s say it and say it again.
What economist Dean Baker calls “The Budget Deficit Crisis Crisis”:
The country faces a serious crisis in the form of a manufactured crisis over the budget deficit. This is a crisis because concerns over the size of the budget deficit are preventing the government from taking the steps needed to reduce the unemployment rate. This creates the absurd situation where we have millions of people who are unemployed, not because of their own lack of skills or unwillingness to work, but because people like Alan Greenspan and Ben Bernanke mismanaged the economy.
The basic story is very simple and one that we have known since Keynes. We need to create demand in the economy. The problem is that, as a society, we are not spending enough to keep the economy running at capacity.
The hole from the collapse of construction and the falloff in consumption is more than $1 trillion a year. The government is the only force that can make up this demand. However, this means running large deficits. To boost the economy, the government must spend much more than it taxes.
The stimulus approved by Congress last year was a step in the right direction this way, but it was much too small. After making adjustments for some technical tax fixes and pulling out spending for later years, the stimulus ended up being around $300 billion a year. Even this exaggerates the impact of the government sector, since close to half of the stimulus is being offset by cutbacks and tax increases at the state and local level.
The answer in this situation should be simple: more stimulus. But the deficit hawks have gone on the warpath insisting that we have to start worrying about bringing the deficit down. They have filled the airwaves, print media and cyberspace with solemn pronouncements about how the deficit threatens to impose an ungodly burden on our children.
This is of course complete nonsense. Larger deficits in the current economic environment will only increase output and employment. In other words, larger deficits will put many of our children’s parents back to work. Larger deficits will increase the likelihood that parents can keep their homes and provide their children with the health care, clothing, and other necessities for a decent upbringing. But the deficit hawks would rather see our children suffer so that we can have smaller deficits.
The current projections show that, even ten years out on our current course, the ratio of debt to GDP will be just over 90 percent. The ratio of debt to GDP was over 110 percent after World War II. Instead of impoverishing the children of that era, the three decades following World War II saw the most rapid increase in living standards in the country’s history.
The reality is that we have an unemployment crisis today, not a deficit crisis. The only crisis related to the deficit is that people with vast sums of money (i.e. the people who wrecked the economy) have been able to use that money to make the deficit into a crisis.
New York Times columnist and Nobel Laureate economist Paul Krugman on “Fiscal Scare Tactics”:
These days it’s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.
Yet they aren’t facts.
The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.
The trouble, however, is that it’s apparently hard for many people to tell the difference between cynical posturing and serious economic argument. And that is having tragic consequences.
For the fact is that thanks to deficit hysteria, Washington now has its priorities all wrong: all the talk is about how to shave a few billion dollars off government spending, while there’s hardly any willingness to tackle mass unemployment. Policy is headed in the wrong direction — and millions of Americans will pay the price.
Mark Zandi, chief economist of Moody’s economy.com on the Ed Schultz show on MSNBC:
Robert Reich, former Secretary of Labor and Professor of Public Policy at UC Berkeley:
President Obama today offered a set of proposals for helping America’s troubled middle class. All are sensible and worthwhile. But none will bring jobs back. And Americans could be forgiven for wondering how the President plans to enact any of these ideas anyway, when he can no longer muster 60 votes in the Senate.
The bigger news is Obama is planning a three-year budget freeze on a big chunk of discretionary spending. Wall Street is delighted. But it means Main Street is in worse trouble than ever.
A spending freeze will make it even harder to get jobs back because government is the last spender around. Consumers have pulled back, investors won’t do much until they know consumers are out there, and exports are miniscule.
Today, though, there’s no sign on the horizon of a vigorous recovery. Jobs may be coming back a bit in the next months but the country has lost so many (not to mention all those who have entered the workforce over the last two years and still can’t land a job) that it will be many years before the middle class can relax. Furthermore, this recession isn’t like other recessions in recent memory.
Obama can no longer afford to come up with lists of nice things to do. At the least, he’s got to do two very big and important things: (1) Enact a second stimulus. It should mainly focus on bailing out state and local governments that are now cutting services and raising taxes, and squeezing the middle class. This would be the best way to reinvigorate the economy quickly. (2) Help distressed homeowners by allowing them to include their mortgage debt in personal bankruptcy — which will give them far more bargaining leverage with morgage lenders. (Wall Street hates this.)
And, lastly, Nobel Laureate economist and Columbia University Professor Joseph Stiglitz in an interview February 9:
We’re sure to see all kinds of economic reporting in the days and weeks ahead purporting to show that there’s no need for more concerted, large-scale action to address the jobs crisis. Highly detailed historical analyses will be used to try to bolster the argument that jobs will come back because “they always do”, that recovery is “just around the corner”, so there’s no need for new job-creation initiatives.
Under the curious headline Steep Job Losses Offer Hope for Fast Rebound, Floyd Norris, chief financial correspondent for the New York Times began his weekly “Off the Charts” column Jan. 16 asking:
Will labor markets in the United States remain weak for an extended period?
For many economists, the answer is yes. They point to the “jobless recoveries” that followed the two previous recessions, in 1990-91 and 2001, and see no reason this recovery should be any different. That has led some to call for a new round of stimulus spending.
But then comes the “but”:
But history indicates there may be more hope for a fast rebound than is generally expected. The two jobless recoveries were preceded by recessions in which employment declines were modest. But after recessions involving a sharp drop in employment, the rebounds have been much stronger.
Citing historical graphs, Norris makes the case that the sharp 5.2% increase in unemployment from December 2007 to October 2009 makes this recession comparable to the three other post-World War II recessions with steep job losses — the recessions of 1957-58, 1960-61 and 1981-82.
And because those three recessions were followed by rapid recoveries with sharp jobs increases, Norris contends, jobs may come back faster after this recession as well.
Or at least that’s the hope that is dangled before us. The two not-so-scientific assumptions being made are: first, that the economy is somehow magically guided by past statistical data; and second, that the current Great Recession is actually comparable to those previous three recessions. Since the first assumption should need no further explanation, let’s look at the second.
The recessions of 1957-58, 1960-61 and 1981-82 all did have sharp declines in employment, but none of them matched the depth of the current downturn. An even bigger difference is the record percentage of long-term unemployed in this recession. Currently more than 1 in 3 jobless workers have been out of work for 27 weeks or more. Longer durations of unemployment tend to make finding a new job even more difficult. And the sheer number of long-term jobless has exploded.
President Obama spoke yesterday at the Brookings Institution and elaborated on a set of major, additional programs designed to address “an urgent need to accelerate job growth” and support economic recovery.
Key components of his plan included the necessary renewal of Recovery Act provisions to extend and expand jobless aid and support for health insurance for the unemployed; increased funds for state and local governments to stave off teacher and other public employee layoffs; tax cuts and other incentives for small businesses to hire more workers and make credit more attainable; expanded transportation, communications and other infrastructure investments that will create jobs; and cash incentives for consumers to weatherize homes and improve energy efficiency.
Despite the fact that the President did not include a new large-scale public jobs program, favored by many, neither did he close any doors to the possibility of taking up additional initiatives.
Far from it. Far more impressive than the details and specifics, which will be hammered out by the White House and Congress in the coming weeks, was the President’s insistent tone and urgent tenor.
Over the previous year, it was obvious that folks were facing hard times. As I traveled across the country during the long campaign, I would meet men and women bearing the brunt of not only a deepening recession, but also years — even decades — of growing strains on middle class families. But now the country was experiencing something far worse. Our gross domestic product — the sum total of all that our economy produces — fell at the fastest rate in a quarter century. Five trillion dollars of Americans’ household wealth evaporated in just 12 weeks as stocks, pensions, and home values plummeted. We were losing an average of 700,000 jobs each month, equivalent to the population of the state of Vermont. That was true in December, January, February, March. The fear among economists across the political spectrum that was — was that we were rapidly plummeting towards a second Great Depression.
So, in the weeks and months that followed, we undertook a series of difficult steps to prevent that outcome. And we were forced to take those steps largely without the help of an opposition party, which, unfortunately, after having presided over the decision-making that had led to the crisis, decided to hand it over to others to solve.
After detailing the beneficial results of the American Recovery and Reinvestment Act (ARRA) and other initiatives put in place this past year to stabilize the economy and begin a recovery, Obama said:
But I’m here today because our work is far from done. For even though we’ve reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who’ve been swept up in the flood. There are more than 7 million fewer Americans with jobs today than when this recession began. That’s a staggering figure, and one that reflects not only the depths of the hole from which we must ascend, but also a continuing human tragedy.
Sometimes it’s hard to break out of the bubble here in Washington and remind ourselves that behind these statistics are people’s lives, their capacity to do right by their families. It speaks to an urgent need to accelerate job growth in the short term while laying a new foundation for lasting economic growth.
On winding down the Troubled Asset Relief Program (TARP):
In fact, because of our stewardship of this program, and the transparency and accountability we put in place, TARP is expected to cost the taxpayers at least $200 billion less than what was anticipated just this past summer. And the assistance to banks, once thought to cost taxpayers untold billions, is on track to actually reap billions in profits for the taxpaying public. So this gives us a chance to pay down the deficit faster than we thought possible and to shift funds that would have gone to help the banks on Wall Street to help create jobs on Main Street.
On why we can’t just go back to the way things were:
I’ve said this before. Even before this particular crisis, much of our growth for a decade or more had been fueled by unsustainable consumer debt and reckless financial speculation, while we ignored the fundamental challenges that hold the key to our economic prosperity. We cannot simply go back to the way things used to be. We can’t go back to an economy that yielded cycle after cycle of speculative booms and painful busts. We can’t continue to accept an education system in which our students trail their peers in other countries, and a health care system in which exploding costs put our businesses at a competitive disadvantage. And we cannot continue to ignore the clean energy challenge or cede global leadership in the emerging industries of the 21st century. And that’s why, even as we strive to meet the crisis of the moment, we have insisted on laying a new foundation for the future.
On the need for major reform of the financial system:
Because our economic future depends on a financial system that encourages sound investments, honest dealings, and long-term growth, we’ve proposed the most ambitious financial reforms since the Great Depression. We’ll set and enforce clear rules of the road, close loopholes in oversight, charge a new agency with protecting consumers and address the dangerous, systemic risks that brought us to the brink of disaster. These reforms are moving through Congress, we’re working to keep those reforms strong, and I’m looking forward to signing them into law.
On the “false choice” between deficit reduction and job growth:
Now, there are those who claim we have to choose between paying down our deficits on the one hand, and investing in job creation and economic growth on the other. This is a false choice. Ensuring that economic growth and job creation are strong and sustained is critical to ensuring that we are increasing revenues and decreasing spending on things like unemployment insurance so that our deficits will start coming down.
On the hypocrisy of budget-busting Republicans and the so-called deficit hawks:
Folks passed tax cuts and expansive entitlement programs without paying for any of it — even as health care costs kept rising, year after year. As a result, the deficit had reached $1.3 trillion when we walked into the White House. And I’d note: These budget-busting tax cuts and spending programs were approved by many of the same people who are now waxing political about fiscal responsibility, while opposing our efforts to reduce deficits by getting health care costs under control. It’s a sight to see.
On past political failures and the current “fight to the finish” for jobs and recovery:
We’ve seen the consequences of this failure of responsibility. The American people have paid a heavy price. And the question we’ll have to answer now is if we’re going to learn from our past, or if — even in the aftermath of disaster — we’re going to repeat those same mistakes. As the alarm bells fade, the din of Washington rises, as the forces of the status quo marshal their resources, we can be sure that answering this question will be a fight to the finish. But I have every hope and expectation that we can rise to this moment, that we can transcend the failures of the past, that we can once again take responsibility for our future.
On the letters he gets from the families of the unemployed, and on the “seriousness of purpose” needed in Washington:
I hear from mothers and fathers, sons and daughters, who’ve seen one or two or more family members out of work. The toughest letters are in children’s handwriting — kids write to me, my dad just lost a job; my grandma is sick, she can’t afford health insurance — kids who can’t just be kids because they’re worried about mom having her hours cut or dad losing a job, or a family without health insurance.
These folks aren’t looking for a handout, they’re not looking for a bailout — just like those people I visited in Allentown — all they’re looking for is a chance to make their own way, to work, to succeed using their talents and skills. And they’re looking for folks in Washington to have a seriousness of purpose that matches the reality of their struggle.
Earlier I posted a summary of the jobs proposals President Obama laid out this morning at the Brookings Institution. Here are a few, still-preliminary thoughts. Since this will be the initial defining address on one of the issues that defines the economy today and will be a massive upcoming legislative debate, it’s worth looking at from a few angles now.
Reasonable people—or, as the president might say, responsible ones—agree: We need serious action to produce jobs and to support people who have been without jobs for months. And they agree on many of the key ways to do that: The president’s address today embraced several points of the AFL-CIO’s five-point plan on jobs, and called for an extension of unemployment benefits extended under the American Recovery and Reinvestment Act, as the AFL-CIO and the National Employment Law Project have done.
Reasonable people can—and will—quibble over the details. We’ll be doing a lot of that in the coming months. But as the speech makes clear, action has been urgently needed at several points in the past year, and is needed once again. Reasonable people cannot disagree on that point—those who don’t think there’s a problem or who think that the way to solve the problem is to continue the policies that created it are not worthy of the title. The debate over the details of how to create jobs and spur economic growth needs to take place among reasonable, responsible people.
If ever there was a time for a fierce urgency to confront the massive jobs crisis in America, that time is certainly now.
Today the AFL-CIO, NAACP, Leadership Conference on Civil Rights, National Council of La Raza and the Center for Community Change announced they will urge the White House and Congress to move forward on a new comprehensive plan for job-creation and real economic recovery.
This is big news — and a major step forward for labor, economic and civil rights groups and the progressive community to build a movement for jobs and recovery.
AFL-CIO President Richard Trumka announced the key aspects of the new jobs plan at the Economic Policy Institute’s Spotlight on Jobs forum in Washington, D.C. earlier today.
Promoting this urgent policy initiative on a new webpage America Needs Jobs Now the AFL-CIO summarizes the core components of the plan:
No one needs to tell America’s families that unemployment and underemployment are at crisis levels. We need jobs—and we need them now.
Wall Street has gotten its bailouts. Now it’s time for Main Street to get some immediate help.
The AFL-CIO is calling on Congress and the Obama administration to take five steps now to care for the jobless and put America back to work.
1. Extend the lifeline for jobless workers. Unless Congress acts now, supplemental unemployment benefits, additional food assistance and expansion of COBRA health care benefits will expire at the end of the year. They must be extended for another 12 months to prevent working families from bankruptcy, home foreclosure and loss of health care. Extending benefits also will boost personal spending and create jobs throughout the economy.
2. Rebuild America’s schools, roads and energy systems. America still has at least $3 trillion in unmet infrastructure needs. We should put people to work to fix our nation’s broken-down school buildings and invest in transportation, green technology, energy efficiency and more.
3. Increase aid to state and local governments to maintain vital services. State and local governments and school districts have a $178 billion budget shortfall this year alone—while the recession creates greater need for their services. States and communities must get help to maintain critical frontline services, prevent massive job cuts and avoid deep damage to education just when our children need it most.
4. Fund jobs in our communities. While workers go without jobs, important work is left undone in our communities. We should put people to work restoring our environment, providing child care and tutoring, cleaning up abandoned houses and more. These are not replacements for existing public jobs. They must pay competitive wages and should target distressed communities.
5. Put TARP funds to work for Main Street.The bank bailout helped Wall Street, not Main Street. We should put some of the billions of dollars in leftover Troubled Asset Relief Program funds to work creating jobs by enabling community banks to lend money to small- and medium-size businesses. If small businesses can get credit, they will create jobs.
America’s jobs situation would be even more dire without the economic stimulus program President Obama and Congress enacted, which has saved or created 1 million jobs. But the depth of this crisis demands that we do more—and that we do it now, before more people lose their jobs, their homes, their health care and their hope.
This is a bold first step. Much needs to be done to build the coalition to generate political support for a comprehensive jobs and recovery policy. Right now, I am fired up — having written months ago about The Coming Battle for Jobs and Recovery.
Even before the release of the October jobs report, former Labor Secretary Robert Reich wrote on his blog that urgent additional action is needed to address the employment crisis.
The Administration’s biggest economic mistake so far was to badly underestimate last January how bad the employment situation would become by Fall. As a result, it low-balled the stimulus — settling for a plan that, while avoiding even worse job losses, didn’t go nearly far enough.
In an accompanying video Reich makes the straightforward case for more federal help to create jobs and spur a sustained economic recovery.
The Obama administration this week announced a new plan to use remaining TARP funds to boost lending by community and other smaller banks. The idea is to make more credit available for small businesses, to help them grow and create more jobs — and do that with funds still available under the Troubled Asset Relief Program.
This is one good step, and hopefully will be joined by many more good steps to begin to generate real recovery on Main Street.
But to seriously address the devastating employment crisis nationwide, and the weight of the recession on our still-fragile economy and neglected infrastructure, something bigger and bolder must be done.
Here is such a plan in a nutshell:
Direct TARP repayments to help capitalize a new National Infrastructure Development Bank.
Here’s how it might work:
Congress and the Obama administration could work to amend the TARP-authorization legislation to include two types of provisions. One would be to systematically schedule stepped up TARP repayments where and when they are institutionally feasible. The other would be to direct the repayments toward the ongoing and continued capitalization of a National Infrastructure Development Bank, which itself would be created under separate legislation.
The idea for such an Infrastructure Bank is not new. New York Times columnist Bob Herbert promosed it in his May 25 piece this year titled Our Crumbling Foundation
I’m not sure that the catastrophic job losses of this recession, the worst since the Great Depression, have really sunk into the public’s consciousness. And that would mean that the ground has not been prepared for the kind of high-powered remedies needed to get the economy back into some kind of reasonable shape.
America has become self-destructively shortsighted in recent decades. That has kept us from acknowledging the awful long-term consequences of the tidal wave of joblessness that has swept over the nation since the start of the recession in December 2007. And it is keeping us from understanding how important the maintenance and development of the infrastructure is to the nation’s long-term social and economic prospects.
It’s not just about roads and bridges, although they are important. It’s also about schools, and the electrical grid, and environmental and technological innovation. It’s about establishing a world-class industrial and economic platform for a nation that is speeding toward second-class status on a range of important fronts.
The infrastructure bank would be authorized to issue bonds, provide loans and offer loan guarantees to finance large-scale projects. The idea would be to leverage substantial amounts of private capital in support of such projects, and to make more prudent decisions about which projects move ahead.
If the U.S. is to have any hope of getting its economic act together over the next few years, there will have to be a much greater focus on putting people back to work. Rebuilding the infrastructure is the place to start.
Senate Banking Committee chairman Sen. Chris Dodd (D-CT) has long been an advocate of a new National Infrastructure Bank and earlier this year noted:
“President Obama co-sponsored our infrastructure bank legislation as a senator and endorsed the idea during his campaign. So, I’m hopeful to see action on the bill this year.”
Democratic Congresswoman Rosa DeLauro (CT-3) has already introduced legislation this year to launch the National Infrastructure Development Bank, along with colleagues including Representatives Anthony Weiner (NY-9), Keith Ellison (MN-5) and Steve Israel (NY-2), and the proposal has attracted broad support from labor, economists and business.
The National Infrastructure Development Bank Act would fund and create a bank that would direct public and private dollars toward infrastructure projects of national or regional significance – a proposal included in the Obama Administration’s budget, as well as the Budget Resolution.
The National Infrastructure Development Bank, modeled after the European Investment Bank, would leverage private sector dollars to invest in transportation, environmental, energy and telecommunications infrastructure projects. It would objectively consider the economic, environmental, social benefits and costs of infrastructure projects, as well as other specific criteria, and fund projects of significance. The Bank would provide investment opportunities that would supplement current federal programs creating jobs, spurring economic growth and rebuilding an infrastructure system for the 21st century.
Initial capitalizations from stepped up TARP repayments could also be supplemented by the Federal Reserve as well as reinvestments of TARP profits where they exist. Public-private partnerships could be brought together to boost the bank’s lending.
Now, there will be those who would say we must immediately use repaid TARP funds to reduce the deficit, and that redirecting TARP repayments in this way would extend those deficits.
But the problem is you can’t simply move paper around to reduce the deficits in any sustained way. And we are simply not going to be able to do that unless we generate sustained economic growth. Sustained deficit reduction requires sustained economic growth. It was, after all, the relatively sustained growth of the 1950s that allowed us to pay down the debts necessarily incurred by first fighting to offset the Great Depression, and then fighting World War II.
And with the real economy stuck in a liquidity trap with both high unemployment and little traction for growth, a bigger, bolder plan like this one is needed.
