The American Jobs Emergency Requires Action

by Robert Reich
December 3, 2010
http://robertreich.org/

This is not a recovery. It’s a continuing jobs
emergency and it demands action.

We learned this morning that unemployment rose to 9.8
percent in November and employers added only 39,000
jobs. Private employers added 50,000 -- the smallest
gain since January. Government employment continued to
shrink.

We’re heading in the wrong direction. In October, the
jobless rate was 9.6 percent, and employers added
172,000 jobs. Private-sector job growth totaled
160,000.

At this rate unemployment won’t return to its pre-
recession level for more than a decade, if ever.

Over 15 million Americans were jobless in November.
This doesn’t include those who are working part-time
but would prefer to work full time. Nor does it include
a record 1.3 million who are too discouraged even to
look for work.

Nor does it take account of the fact that most families
are dependent on two breadwinners. So to figure out the
true impact on most families, all these numbers have to
be doubled.

Nor does it reflect the fact that the level of
unemployment tracks level of education. Only 5 percent
of those with college degrees are now unemployed, while
more than 20 percent of everyone else is without work.

Maybe that’s why Washington doesn’t get it. The
Washington echo chamber is filled with college degrees.

The Big Money economy on Wall Street and in corporate
suites doesn’t get it, either. They’re doing
marvelously well because they’re tied to rapidly-
growing markets in China, India, and Brazil.

But the Average Worker economy on Main Street continues
to wallow.

The Problem

Let’s be clear about this. The problem is lack of
sufficient demand for workers.

There are only four sources of demand. The biggest
source is American consumers, who comprise about 70
percent of economic activity.

But the vast American middle and working class can’t
and won’t buy enough to get people back to work.
They’re still under a huge debt load.

Even if and when they pay it off, their buying days are
gone. The Great Recession took away their last means of
coping with years of stagnant wages -- going deeper into
debt by using their homes as collateral. The housing
bubble burst, and home prices continue to drop.

The second source of domestic demand is business. But
businesses won’t hire more workers without more
customers.

(Republican supply-siders say businesses are not hiring
because they’re uncertain about the effects of the new
health care law and don’t know how much taxes they’ll
have to pay. This is political claptrap. Supply-siders
also say businesses would start hiring if their taxes
were lower. But businesses are sitting on almost a
trillion dollars of cash. They don’t need lower taxes
in order to hire more Americans. They need more
American customers.)

The third source of domestic demand is net exports. But
they’re going nowhere. Although China, India, and
Brazil are buying goods and services from American
companies -- and thereby boosting US profits -- those US
companies are making most of what they sell there in
those countries. GM is selling more cars in China than
in the US now, and manufacturing them in China.

That leaves the fourth source of domestic demand --
government. But it’s not nearly filling the gap. To the
contrary, state and local governments are broke, and
are cutting spending and raising taxes to the tune of
over $110 billion this year. The federal government’s
much-maligned stimulus is about gone (almost all
economists believe it saved over 3 million jobs).

The Fed is pumping $600 billion into the economy, but
without an expansive fiscal policy this is only fueling
speculation.

Instead, austerity and deficit reduction are the new
buzz-words in Washington, as well as in Europe -- which
is absurd given what’s happening to the economy.

Republicans won’t even vote to extend unemployment
benefits for the record number of Americans -- almost
half the unemployed -- who have been out of work for six
months or more. Starting today, 800,000 of the long-
term unemployed lose their benefits. Unless Congress
moves quickly, by the end of December, 2 million more
will lose them.

What must be done

Extend unemployment benefits. Not only do unemployment
benefits help families who are hurting; they also put
money into their pockets that they’ll then spend -- and
their spending will keep other Americans in jobs.

I was on television yesterday debating a Republican who
insisted unemployment benefits deter the jobless from
finding work. Another partisan bromide. When, as now,
five people are out of work for every job opening -- and
when, as now, unemployment benefits in most states are
a small fraction of someone’s former wage -- it’s
bizarre to argue that unemployment benefits are causing
unemployment.

Create a new WPA and National Infrastructure Bank. Not
only do we need extended unemployment benefits. We need
a new WPA, modeled after the WPA of the Great
Depression, to put jobless Americans to work. We need a
national infrastructure bank to rebuild our crumbling
highways and water and sewer systems, thereby putting
additional people back to work.

Cut payroll taxes and enlarge the EITC. We should
exempt the first $20,000 of income from the payroll
tax, thereby putting more money into the pockets of
lower-wage workers -- which they’ll spend. We should
extend the Earned Income Tax Credit -- a wage subsidy --
upward through the middle class, and reduce taxes on
everyone up to $80,000 of income.

How to pay for this. Not in 70 years has so much of the
nation’s income been at the very top. Pay for all of
this with a 2% surcharge on incomes between $1 million
and $2 million, a 3% surcharge on incomes between $2
million and $5 million, and a 5% surcharge on all
incomes over $5 million. Add in a .5 percent
transaction tax on all financial transactions.

Why Would Republicans and Conservative Dems Ever Agree?

They’ll agree to measures like this when they
understand that our choice is either such reforms or
continued economic stresses for millions of American
families -- stresses that will translate into an ever
angrier and more divisive politics.

(When I wrote my new book "Aftershock," I hoped what I
saw unfolding would not become the new reality. It is.)

They’ll agree when they see that we can not go back to
the old "normal" of an unprecedented concentration of
income and wealth at the top, because that old normal
got us into the present fix.

It undermines the purchasing power of the rest of
America. It invites speculation on Wall Street.

And it translates into extraordinary political power of
a moneyed elite hell-bent on gaining even more power
and wealth, and preventing the rest of America from
flourishing.

But why would this moneyed elite ever agree? They’ll
agree when they understand this is a lousing strategy
for even for them.

Those at the top would do better with a smaller share
of a booming economy that elicits a positive politics,
than they will do with an ever-larger share of an
anemic economy that fuels the politics of anger.

They should convey this message to their bought-for
representatives in Congress.

___________________________________________

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