As part of the Roosevelt Institute's 10-part series on the Jobs Crisis, running on the New Deal 2.0 blog from Nov. 12-25, I was asked to reflect on what can be done to get Americans working again. Here's my take.
The latest jobs report shows that the official unemployment took a huge jump to 10.2% -- 15.7 million jobless workers. If we add to those numbers involuntary part-time workers, plus those who have given up looking for work, the unemployment rate is 17.5%. Even that seriously undercounts those who would be willing to work if decent jobs at decent pay were readily available -- a number I put at 25 to 30 million. While there has been some debate about the number of jobs created or saved by the fiscal stimulus package, it is clear that Washington's effort has fallen far short, and all plausible projections show more job losses to come.
What perplexes me is that we have been here before, and we know how to solve the unemployment problem: create jobs through a new, New Deal-style jobs program.
I am advocating using those same principles, but creating something both broader and permanent: a universal job guarantee available through the thick and thin of the business cycle. The federal government would ensure a job offer to anyone ready and willing to work, at the established program compensation level (including wages and a healthy benefits package). To keep it simple, the program wage could be set at the current federal minimum wage ($7.25 an hour), and then adjusted periodically as that is raised. The usual benefits would be provided, including vacation and sick leave, and contributions to Social Security. Let's call this the Job Guarantee (JG) program.
The original New Deal programs included large-scale infrastructure projects with direction coming from Washington. A permanent and universal JG program should be decentralized, with projects created and administered locally -- where the workers are, and for the benefit of their communities. The federal government would provide the wages, plus a portion of capital and supervisory expenses (perhaps capped at 25% of total wages paid for each JG project). Local governments and nonprofits would propose projects and cover the rest of the expenses. State unemployment offices would be converted to employment offices, helping to match workers and projects.
Project proposals would be submitted to regional councils and, if approved, would be evaluated by state councils and then by a federal council. Wages and benefits would be paid directly to workers (using Social Security numbers and direct bank deposits) to minimize fraud. Organizations submitting proposals would be prevented from replacing paid workers with JG workers. For-profit business would be excluded, because the temptation to substitute would be too great. At the same time, businesses would be protected from unfair competition because all JG projects would have to demonstrate they'd fulfill unmet public purposes. If at some future date, a for-profit firm decided to provide services that a JG project is performing, the JG project could be phased out. There is neither need nor desire for the JG program to compete with the private for-profit sector.
This brings us to the fundamental principle of the JG program: it is a complement that provides jobs to those who would otherwise be jobless and it provides public services and infrastructure that otherwise would not be supplied. It is important that JG jobs do useful work -- so that workers can feel proud of their contributions and to maintain the community's support. At the same time, JG workers will be gaining useful work experience and training, making them more appealing to other employers. When firms hire, they will recruit from the JG program, offering a slightly higher wage.
There will be two main categories of JG projects -- those that are permanent and those that are "off the shelf," undertaken in recession as the number of JG workers grows. The first will probably consist mostly of public services (care of the aged, playground supervision) while the second could include public infrastructure construction and repair. There is no sharp dividing line, but the point is that between boom and bust the number of employees in the JG programs will probably fluctuate by some 5 million (perhaps 20% of the total). It is important, however, that this fluctuation is not permitted to disrupt provision of services to which the community has become accustomed.
At the same time, the program's fluctuation allows it to act as an employed "buffer stock" -- or "reserve army of the employed" -- helping to attenuate the business cycle while maintaining full employment without setting off a wage-price spiral. An economic boom will shrink the size of the JG program; in a recession the program will grow.
Thus, an effort like the Job Guarantee program I am proposing would act as an automatic stabilizer -- a feature most would agree is desperately needed in our current rollercoaster economy.
This post originally appeared on New Deal 2.0.
You can't get to more jobs without more captial, and you can't get to more capital with banks loaded down with toxic assets, and Federal, State, and Local governments loaded down with debt.
What's the answer? Credit. That's right, credit.
Tthere is nothing prohibiting any level of government from creating credit. If the private sector can't do it now, the public sector can. Any local government, State or even the Federal government can charter a bank and have it operate as dba, doing business as, for instance the State Bank of North Dakota.(There really is a State Bank of North Dakota.) These types of banks can create credit just like the private Federal Reserve System.
These banks can also use fractional reserve system ratios of anywhere from 4-1 to 10-1. These banks would have lower interest rates because they would not be saddled with the detritus of the current financial system; no bond holders, mega salaries, derivatives, etc.
Job creation is not a problem since liquidity is not constrained. Check out Huffpost contributor Ellen H. Brown's article on why California should own its own bank--http://www.huffingtonpost.com/ellen-brown/california-dreamin-how-th_b_228036.html
We don't need more of the same old raise taxes and cut programs. We need immediately available credit with which to build businesses and therefore, create jobs. These are the solutions the Summit should address.
"We are spending more money than we have ever spent before and it does not work. I want to see this country prosperous. I want to see people get a job. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started and an enormous debt to boot."
The problem is our central banking system. We have way too much debt due to our ponzi debt-based money system and the concept of compound interest (making money with money). At least 40% of our productivity is wasted on interest payments. A small percentage of the population collects compound interest while the majority are debt-slaves paying compound interest.
This causes most or the countries wealth to aggregate in the hands of the few (1% own 95% of wealth). Sufficient Jobs cannot be supported when only a select elite have all of the spending power that is not based on continued debt expansion.
Compound interest grows exponentially, economies do not. This IS the problem.
We should start by absorbing the private Fed into the public Treasury (public money creation, as the constitution stipulates) and giving Americans what banks now get - near-interest free money (e.g. direct access to the discount window).
This alone could cut everyone's mortgage in half, fix the toxic waste issue, stimulate housing and the economy, provide shelter, save enormous amounts of interest, a real ownership society, revive trust in markets, even out wealth distribution, etc.
1. Please understand that I was asked to write a short piece (500 word max, which I exceeded by 50%) on the JG. I could not cover all issues related to the JG and had to simplify some arguments.
2. I have written (literally) tens of thousands of words about the current global crisis (beginning in 1999!). I agree that banksters and inequality played a huge role. However, the JG proposal--as I explicitly said--is designed to be permanent, through the thick and thin of the cycle. Hence the various comments about the crisis are simply not relevant.
3. Those who say the New Deal direct job creation programs "did not work" are simply ignorant of the facts. They employed real people; they produced real projects (many of which still exist and still serve useful public purposes). Further, they did reduce the unemployment rate (many quote unemployment rates in the 1930s that INCLUDE all the New Deal employees as unemployed. Marshall Auerback has demonstrated this error). Finally, YES I agree, the programs were too small, and were only temporary. That was a mistake. YES it was only WWII that generated enough gov't spending to get us out of depression.
The idea that debt destruction in the form of foreclosure and bankruptcy is "healthy" is absurd, but yes, this is our current system. Debt destruction = deflation = depression = mass misery.
A small percentage of our population has so much money that can't possibly spend it and there is nothing real to invest in anymore (at least in the US), so they invest it elsewhere or buy gold, play games with the stock market and speculate in commodities.
How many jobs would be created if that excess wealth were in the hands of the people that would actually use the money here?
Bring back the tax code from the 1950's. That's it. Too bad it won't happen until the floor falls out from under us.
3. (continued) It must be remembered however that Prez Roosevelt campaigned to balance the budget in 1936 (driving the economy back into depression in 1937). Unfortunately, Prez Obama announced his intention to do the same thing next year!
4. On the wage setting for the program: I chose the minimum wage "to simplify matters". Perhaps the right wage is $10 per hour; maybe it is $20 per hour. This will require serious analysis and public discussion. I actually favor a "living wage". However, note that we can keep down the monetary wage but provide more nonmoney benefits if desired (health care, child care, transportation, even housing). For that reason, I think it is misleading to compare living standards based solely on today's minimum wage worker (who receives little or no benefits).
5. Again, this piece was by design short and simple. I encourage those who are interested to explore the many papers at www.cfeps.org and www.levy.org on this topic (many written by yours truly).
First of all, I don't believe that the "New Deal jobs programs" actually worked. What "worked" was World War II, but even that wore-off fairly quickly.
I believe that "financial crisis" is one persistent problem that has always vexed this country. We have never really addressed the cycles of boom-and-bust. Yet we did have a brief hiatus (which most of the surviving generation actually comes from), which is the aftermath of Post WW2 =production.=
We have consistently abandoned =production= in favor of the fictions of a well-greased banker's books. And we have allowed our legislators and "any civil officer" of our Government to remain well-greased too, without ever applying the "zero tolerance" law-enforcement provision of Article 2, Section 4 of that tiny document that we euphemistically call "the Supreme Law of the Land."
The circumstances that face us now are, quite literally, the result of "high crime." The Beltway is chock full of it. Bribery, though listed alongside Treason as one of the two high crimes listed by name in that Section, is a career. You are "a lobbyist," a "campaign contributor," or a corporation engaging in "free speech."
We are here, Randall, because the fairy tale of Rumpelstiltskin is true. And a dozen other cautionary tales which we choose to ignore at our own peril. We ... know ... this.
If you think about it, wall street management (big banks, et al) has become a government jobs program for the very rich. And they didn't have to produce anything to milk us dry. They simply put a gun to our heads by saying that if we didn't pay them hundreds of billions of dollars, the entire economy would collapse and we'd have chaos in the streets. It was extortion, pure and simple.
The WPA in the 1930s probably saved the U.S. from a violent revolution. And, if you happen to research some of their completed projects, you'll see the workers did a remarkable job. The people needed and wanted to work. They were growing despondent. Extreme poverty had put so many people into mental depression it was dangerous for the nation as a whole.
People need to feel that they are part of some positive action. Otherwise, they will fall into despair and end up choosing some fascist government just for the promise of work. Look how the Nazis came into power.
We shouldn't let the mental health and physical survival of our population be controlled by the whims of corporate manipulation.
"Uncle Sugar" proclaims to be infinitely rich ... but the dollars cannot be poured out to the common man because suddenly everyone would be buying and no one would be building and selling.
Where is the "We Can Do It!" attitude that is expressed in the original poster on my office wall? How did we allow ourselves to become so soft?
Why did we allow criminals to invade the highest halls of power in our nation, and why do we stare stupidly at them now, "wishing" that they would stop stealing and maybe toss us a crumb of bread to eat?
Take a lesson from a very famous dog: to get rid of crime you have to Take A Bite Out Of it. But first you have to bluntly call it crime. Article 2 Section 4 places no limit whatsoever on the extent of its reach; quite the opposite.
Our choice is: either "zero tolerance," or "307,925,155 victims."
And counting ...
307,925,162.
307,925,198.
307,925,204.
High crime.
Real crime.
Real victims.
http://www.guardian.co.uk/world/2009/nov/12/un-investigator-us-neglect-homeless
For those who like to blame the victims, i.e., "Americans don't have to work, the government will take care of you", take note that welfare in a high cost area like LA is $221/month. Less than half of what it costs to rent a room.
Rethugs thought if the social safety nets were destroyed then the problems would go away. They didn't, and now it is only making the economic downturn worse. In some developed countries, unemployment benefits can be as high as 70-80% of salary and can last for up to two years (depending on age). How many homes would have been saved if people had such benefits?
Military Forces and redirecting their efforts toward rebuilding our crumbling infrastructure. These
ideas, however, put the Cart before the Horse, to use an ancient expression. The FOUNDATION of
our Economy is broken--until measures are taken to fix it (repeal of Glass-Steagal along with other REAL controls put on the Financial Services Industry, addtional increments in the Federal Tax Rate to a cap of 48%, etc.), NO other spending measures should be considered.
My objection to a Jobs program currently can also be extended to HEALTHCARE reform inclusive of a Public Option. We CANNOT have it until we have the means to PAY for it.
Now our world is threatened by global warming (even on chilly days, but let's give the mic to the jerks who are confused by this). Scientific solutions have been found, but we need a tremendous amount of manpower activated to implement these solutions. A high unemployment rate drops into our lap - idle hands by the truckload. Capitalism wants to be in charge of sorting this out for us - right - Isn't it time to break the taboo against serious criticism of capitalism (Fox won't like it, dear me), and just do what we need to do?