THE BLOG
05/16/2010 05:12 am ET | Updated May 25, 2011

Mission Un-Accomplished -- "Promises to Keep"

As long ago as December 13, when we were still shedding jobs like water, Larry Summers, the President's Director of the National Economic Council, declared that "everyone agrees that the Recession is over" -- the press practically swooned, and you got the sense that someone in the Executive had found and was about to again unfurl Bush's infamous "Mission Accomplished" banner.

Then just three weeks ago, on February 23, the Congressional Budget Office reported that the economic stimulus package has "created or saved" between one million and 2.1 million jobs, with another 400,000 or so to follow. This time the press went completely gaga over the implication that if so many jobs have been "created or saved", with a few hundred thousand still to come, then economic recovery must be nearly complete. USA Today in its lead editorial the next day went so far as to say that "the stimulus has been so effective...that it casts doubt on whether Congress should even bother with a new one."

Finally, the lead story on March 6 of the Gray Lady herself, the New York Times, blared: "[February's] Flat Jobless Rate A Sign The Worst Of Slump Is Past".

Well, with a nod to our nation's greatest poet Robert Frost and perhaps his most famous poem ("Stopping by Woods on a Snowy Evening"): "[We still] have promises to keep, and miles to go before [we] sleep." For the sad truth is that the number of unemployed workers in February in all four categories of unemployment increased by an additional 487,000 to 29.7 million, rather than the Bureau of Labor Statistics' factors lower announced loss of only 36,000 jobs, and the real unemployment rate increased 0.2% to 18.6%.

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Inexplicably, people in the administration and elsewhere continue to look at the wrong numbers when they make their pronouncements, and easy evidence of this is found in two captions which also ran on the front page of the Times on March 6 (and were largely ignored): "The company has cut jobs and remains reluctant to hire", and "For towns with shuttered auto factories, a Washington envoy brings stimulus money and ideas, but few jobs."

In the White House, it's pretty obvious from their statements and writings that the economic indicator which matters most is GDP growth, even though this stopped being dispositive years ago because it only measures activity and not benefit, and because it can be so easily distorted by 'good news' at the top of the economy or, as has occurred in the last two quarters, by unsustainable business inventory adjustments. If any of us kept our personal checkbook the way the Executive uses GDP to measure the health of the national economy, we'd be 'just fine, thank you', since we would merely add all the money deposited into our account to all the checks we wrote - with no pluses and no minuses - and declare ourselves rich. But in fact, all we would know is the sum of the 'ins' and 'outs' of our household, and not at all whether we are doing well or poorly.

In fact, the only indicators that matter as we try to recover from the Great Recession are the real unemployment rate and the real average wage. And Mr. Summers simply doesn't know enough from two quarters of very misleading GDP growth to say that "the Recession is over", nor should anyone say that the 'worst of the slump is past'.

And no matter how much the Executive and the CBO might like it to be otherwise, THERE IS NO EMPLOYMENT STATISTIC COVERING 'JOBS SAVED'. If you're one of the 30 million American workers currently among the real unemployed, you certainly know the mountain of difference between a job created and a job saved!

I for one believe that last year's stimulus package actually created only around 500,000 to 1,000,000 jobs, which is a fraction of what the administration is claiming for the sum of jobs created and jobs saved, but regardless of what the precise number is, it was at least 22 million too few. This is the real problem - this failure to create all but a tiny percentage of the new jobs we need - and this is why the Recession is far from over.

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The two most effective large-scale jobs initiatives we could enact to find these millions of missing jobs - which would also give us the quickest outcomes - are (1) investments in infrastructure and 'things green', provided the spending is coupled with buy-domestic requirements and (ideally) enabled by a new National Infrastructure Bank, and (2) employment programs for the roughly 3 to 5 million unemployed out-of-school youth.

Each $1 billion spent on infrastructure creates on average 25,000 new jobs, and when the investments are for high-tech green things such as improving energy efficiency in manufacturing facilities, smart grids and smart meters, and large-scale building retrofits, the figure is much greater. And for those millions of unemployed out-of-school youth, which is a group that will burgeon in size again this summer when another 6.4 million young people graduate from high school and college, all we need to do is enact - and fully fund - programs like the National Youth Administration and, in earlier times, like VISTA, CETA and San Francisco Mayor (now Senator) Dianne Feinstein's very successful municipal youth employment initiative.

Everyone in Congress is rightly concerned about the federal debt - as every citizen should be - but this doesn't mean we can run away from the major fiscal efforts needed to quickly and dramatically reduce real unemployment. To more than cover their costs, I recommend four revenue initiatives, aimed only at financial speculators, tax abuses, or the top 3% to 5% of individual taxpayers:

1. We need to adopt the financial transactions tax or FTT which Congress is considering imposing on the stock purchases, options, derivatives and futures of traders and extremely wealthy individuals. This FTT - while would exempt stock transactions undertaken by the middle class including their IRAs and mutual funds - would raise a much-needed $150 billion or so annually, meet the President's goal of moving "from an era of borrow and spend to one where we save and invest", and move financings overall toward longer-term and thus more prudent time horizons.

2. We need to end "tax breaks for companies that ship jobs overseas" as President Obama promised during his 2008 campaign, which would raise at least $25 billion a year.

3. We need to classify and tax the 'carried interest' earned by hedge-fund and private-equity managers as ordinary income at a 35% rate rather than as a capital gain at a 15% rate, which would raise as much as $10 to $12 billion per year.

4. We need to raise the top - but only the top - tax rate on long-term capital gains back to the 28% rate signed into law by President Reagan, which would raise about $25 billion per year.

And while we move on all of this, please let's all agree on no more undersized, piecemeal job-creation bills like the small $15 billion ones that the Senate and House just passed, which will now only delay us more from having the properly-sized, multi-year, effective bill we've needed since December 2007.

So yes, Mr. Frost, we do indeed have "promises to keep", and they are to the nation's 159 million workers, of whom fully 19% are effectively unemployed.

Leo Hindery, Jr. is Chairman of the Economic Growth/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.