OK, so it took two and a half years, but now almost every politician and pundit who matters, progressive and conservative alike, pretty much believes that the effective real unemployment rate today is on the order of 19%, and that accordingly the economy needs to create around 22 million new jobs in order to be near fully employed. The notable exceptions, unfortunately, are certain senior officials within the administration who continue to use the BLS's lower-by-half 'official' unemployment rate of 10% and to suggest that we need to create around 9 million new jobs.
With nearly everyone now starting his morning by chanting "jobs, jobs, jobs", what I find so puzzling -- and concerning -- is the ongoing debate in Congress between 'job creation' and 'deficit reduction' and the premise that they are mutually exclusive. Voters and workers -- who are the only ones who really count -- clearly hate unemployment much more and much more personally than they dislike deficits, which they barely understand. And if they are mutually exclusive, which I absolutely don't believe they are, then how right now, with the bogie being 22 million needed new jobs, can 'job creation' be losing out, as it seems to be.
The most important domestic policy issue right now is what to do about the jobless recovery we are mired in that has little or no prospect of evolving into a traditional recovery that will reinvigorate the middle class and correct the wage stagnation that plagues them. Even when the administration, in a completely unwarranted way, lauds the jobs figures, as it did last Friday when the 'official' May figures came out that showed "non-farm payrolls increasing by 431,000 jobs", the reality is that in real terms only 114,000 new jobs were created and that was only after including 411,000 new full-time but temporary Census workers.
This Recession is so acute that in order to get the nation's businesses back investing and hiring, we need economic opportunity of the sort that only large-scale Keynesian-type government intervention in sustained job creation can generate. So, before addressing the concerns of the 'deficit hawks' in Congress which we can't ignore, let's first talk first about the three government actions that we know would most immediately create millions of new jobs:
1. "New Deal-Like" Programs
(i) For the 3 to 5 million unemployed out-of-school youth, a group that burgeons in size every summer when another 6.4 million young people graduate from high school and college, a broad-based Municipal Youth Initiative that draws from our previous successful experiences with VISTA and CETA.
(ii) Community-based job creation programs for restoring the environment, providing child care and tutoring, cleaning up abandoned buildings, and maintaining parks and public spaces. The government should also take steps within existing programs such as the Workforce Investment Act to provide additional incentives for job creation and training in needed areas such as nursing, engineering and math & science instruction.
(iii) Create a Teacher's Aid Corps to complement the existing Teacher's Corps, to include training adapted from Teach for America's highly successful program.
2. 'Buy-Domestic' Government Procurement Requirements that mirror those of our trading partners, which should create on the order of at least a couple million permanent jobs, mostly in manufacturing. Federal government purchases run around $3 trillion a year and comprise about 20% of the U.S. economy, yet the U.S. is almost alone among the major developed nations and China in not having a significant buy domestic program. At the same time, we need to enact forms of investment criteria for public resources not covered by these requirements, such as use of domestically produced parts and components and return of idle manufacturing capacity to productive service.
3. Infrastructure
(i) A 10-year program of significant public investment to upgrade and rebuild the nation's infrastructure, which still has at least $3 trillion in unmet needs. Provided it has associated buy-domestic requirements, each one billion dollars invested in public infrastructure creates on average 25,000 permanent American jobs, and when the investments are in high-tech initiatives, the figure is much greater, on the order of 40,000 permanent jobs.
(ii) A fully-funded and fully-authorized "National Infrastructure and Production Base Bank" that would enable the federal government to leverage the private capital markets to fund infrastructure spending. (Since the Bank would function completely removed from the nation's yearly budget, while offering the opportunity to create millions of jobs and restore some of our global competitiveness, how is it that the administration can muster only 'vocal support', token proposed funding and a limited charter?) The Bank needs to be able to issue bonds with relatively long maturities and a minimum rate of return guaranteed by the Treasury, and to work side-by-side with large-scale private-sector funders, both domestic and current account surplus countries.
These major new-jobs efforts will lead to more deficit spending in the very short term, but only in the very short term. However, if intelligently conceived, they would, because of their associated large-scale job creation, be at least deficit neutral over the next decade and, most likely, even substantially deficit reducing.
Nonetheless, the deficit hawks in Congress are not without their due, in part because so much of that first trillion dollars or so of stimulus money didn't create a meaningful number of jobs and/or wasn't spent very effectively. The hawks are also 'owed' because of the large (and to date unexplained) disconnect between President Obama's recent commitment to get the federal deficit down to about 3% of GDP by 2015 and the International Monetary Fund's very contrary conclusion that by 2015 America will actually have a structural deficit more than twice this figure (i.e., 6%-plus of GDP).
Even though it's going to be hard right now to label anything 'additional stimulus', we can't ethically or economically run away from the major fiscal efforts needed to create those missing jobs. So, in the best tradition of "Pay-Go", a concept consistently talked about but just as consistently ignored, there are four very simple ways to raise more than $200 billion a year to pay for all the job creation we need, all aimed at only the top 3% to 5% of taxpayers:
Now let's talk about the latest Jobs Bills which Congress is considering, which range in amount from $50 to $134 to $200 billion. By far, most of this money would be spent on extended unemployment benefits, health subsidies for the unemployed, and Medicaid money for the states, and while the moral imperative behind these welfare-type outlays is indisputable, they are not really "stimulus", which is supposed to create permanent improvements, especially in job growth and quality, in stagnant or broken economies. And we should be especially concerned that having already 'gone to the stimulus well' so many times, whatever this Congress does next will be their last whack at stimulus until at least the next Congress, even if we find that the country is still short millions of those urgently needed jobs, as I believe will be the case.
So, rather than another poorly designed and seriously underfunded 'stimulus' effort, let's take the three government job creation actions that we know will work, let's more than 'pay for them' currently in ways that are completely fair and balanced, and let's acknowledge that there is in fact a readily achievable middle ground solution for, on the one hand, those American voters and workers who 'hate unemployment' and political leaders, on the other, who are rightly concerned about our nation's ballooning deficit.
In quickly closing, let me say that while there is a lot of talk coming from the White House regarding these issues, there seems to be a complete absence of 'operational urgency' given its other priorities. And since operational urgency is the here-and-now sine qua non, it's going to have to be Members of Congress who get these balls rolling, some of whom have been resolute and informed on these issues from the earliest days and some, unfortunately, not nearly enough.
Leo Hindery, Jr. is Chairman of the US Economy/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.
The government can create a market because it can predict the future. It can make something legal (pot), make something illegal (alcohol), it can raise taxes now or on something ten years from now (foreign oil) or it can lower taxes on something. The only requirement is the governments action should be targeted at something as opposed to across the board because we want to create a permanent market not to fine tune a well running economic engine. So the question is what US market should we create, the Bush tax cuts created a market in India and China because that's currently where the highest ROI is. Second are investors willing to invest? If the government predicts the future investors will invest. Third are your customers able to buy your product. If the government used a U-shaped model with the most tax breaks in the early and most taxes in the latter years over a ten-year span we could get off foreign oil and save 475 billion a year. So the question is if you raise or lower taxes what market do you create and in what country.
Current unemployment of real 19% is exactly what business wants. More people in the labor pool leads to more people accepting lower wages in order to get or keep a job. The oversupply comes both from illegal and legal immigration, as well as shipping jobs and factories overseas.
Unfortunately, the President who was going to look at NAFTA, was apparently just talking to get votes - like card check, no taxes for seniors making less than $50k, ending the wars in the toilets of Iraq and Afghanistan, and allowing public healthcare that humans here could afford.
The same business leaders, who applaud the victory of Blanche Lincoln because unions supported her bland opponent, also support high unemployment and the glorification of weasels and rats in the White House.
GASP! The terror!
It's quite clear what and who is sad with your post.
Congrats.
The Supreme Court has ruled that corporations are persons. However, like the tin man of Oz, they have no heart. By definition they exist solely to make a profit. In fact that is their fiduciary responsibility. They do not exist to help their fellow man and it is unrealistic to think they will be solution here. Corporations do not exist for the public good. The solution to the employment crisit requires an entity that does. Congress must therefore act in the public interest here. Employment recovery starts with them.
It is because of your "Laffer corve, Friedman School, Trickle-down (Pee'd on), Voodoo, Supply-side, Reaganomics", economics that we are in the state we are in. Ever since Reagan we have had to endure this attack and yes, even Clinton was pressured by Greenspan to follow the "Ayan Rand","Friedman School" that has resulted in the destruction of our middle class and our American way of life. The only way we can save our country is to return to following sane "Keyes" type economics. Have you already forgotten that Greenspan was the one who talked Reagan into raiding the Social Security fund? If we have any problem with Social Security it is because of "Greenspan's Fraud" ~ see "Greenspan's Fraud" by Ravi Batra for starters...Wake up and smell the coffee!
Thank you
This plan will cause further misallocation of resources. It can only end in hyperinflation, dollar devaluation, default, and revolution. WAKE UP! Do not destroy our country! STOP!
Lets hope that you and I and those of us who actually understand reality will be able to bail everyone out with our hard work. If not, best of luck to ya.
OMG... DUHHH. OF COURSE JOBS CREATE INCOME BUT THEY MUST COME FROM THE PRIVATE SECTOR... PRIVATE SECTOR ... PRIVATE SECTOR...
GOVERNMENT JOBS NEED TAX REVENUES TO SUSTAIN THEMSELVES...
THE VAST MAJORITY OF JOBS OBMA'S CREATED HAVE BEEN UNSUSTAINABLE GOVERNMENT JOBS.
Makes you wonder what kind of capitalist society are we if we're too poor to invest in ourselves.
When less than 40% of Americans pay tax, does that seem sustainable to you?
When the taxes off the shrinking private sector are the only thing paying the salaries for the ballooning public sector, how long do you think that will be sustainable?
A quote from a politician across the pond:
"The problem with socialism is you eventually run out of other people's money".
Common sense. Look into it.
Your political argument about socialism is absurd, you're taking a quote from a right wing UK politician, you could look to Germany, China, Norway, Sweden and see much different, and in many cases superior GDP and deficit conditions than we have here in the US.
"Common sense" you must be equivocating with that phrase, unless the core of your argument is some hidden agenda to turn this country into the next Mexico or Indonesia.
you want the public sector hiring people, then STEP UP TO THE PLATE PRIVATE SECTOR!!!! stop with having to increase your profits every year just because you can and be happy with a profit every once in a while. stop pleasing the largest shareholders with increasing dividends every single time and start looking after the rank and file. because with out a middle, there can be no top, just the bottom.
Even with these continued "exceptions" to the "pay-go" BS that congress passed, meaning the countless "jobs" bills and "unemployment" wellfare bills that have been added on and added on and added on, as recently as Memorial Day weekend, you are saying we need to spend more money, because we haven't spent enough, and THATS why we aren't out of the recession?
Ok, I don't mean to be rude and bring REALITY to the table here at huffington post, but its time true economic principles, not failed Keynesian principles, are put to use.
Waving off the debt with the shake of the hand is nothing short of insane. Our Debt-GDP ratio is astonishingly high and may already be unsustainable.
The only reason we haven't turned into Greece yet is that Greece, unlike us, used the Euro and thus was FORCED to pay up and cut costs, because they couldn't just "print money" and devalue it like Obama has done the dollar.
In a way, that's lucky for Greece, because we unfortunately are lulled into this false sense that everythings OK, and yet every day we are borrowing over 3 billion dollars. EVERY DAY!
Please tell me how that is dismissive and how it makes any sense whatsoever to spend MORE on WASTEFUL government programs?
The writing on the wall has been put in caps, bold, underlined, italics, exclamation points, etc, but you just can't seem to see it can you?
If you look at some of the larger businesses in this country, they were originally funded by Credit Cards. I would suggest, it's now what you spend, but how you spend it. Let's take a stroll across our Border to the North. You will find that the taxes are high, but in general the average Canadian, is quite satisfied with the returns that they get. They are also in a recession, but in general they feel much better about where they are than we do. That is because, their attitude towards credit is somewhat different to ours.Spending alone is not the issue. There are a myriad of things, like tax enforcement, regulatory enforcement, and Election Reform. We condone legal bribery, and that is never good.
I think we also have to find some way to have Government and the Private Sector collaborate more, something along the lines of Brazil, and other emerging markets, that would help. But I fear in our arrogance, we feel that there is nothing anybody can teach us. Too bad.
Also try opening up an economic book that shows why Keynesian THEORY is unsustainable. You'll find it in any macro economic book that's written by anyone even remotely competent in economics.
You're right, we condone legal bribery, which is disgusting, and it has happened long before corporations were allowed to make contributions.
Where's the outrage over the union contributions? Where's the outrage over kick backs, bribes, meddling in primaries, etc?
If you are going to act like these things are truly outrageous to you its time to belly up and hold your own "friends" accountable as well.
Either we all decide we want a society where people generally look out for one another and care about community, or we have a country where we are in constant competition with one another and try to "one-up" the next guy and "look out for #1."
We can't have it both ways and judging by the publics' voting habits over the last thirty years and the governments they've seen fit to put into power over that time, the vast majority of folks like the latter philosophy (ie rugged individualism rules).
Of course a society where everyone is in constant competition does lead to things like Iraq, Katrina, the housing bubble melt-down, and the BP oil spill. But if we're all on board with it then it's fine, Right?
Stop perpetuating the myth of the Keyneisan economics as the soulution to our problem... IT WILL DESTROY US. Keynesian himself when asked about the long term effect of his economic vision was a very cynical, he blithly stated "I will be Dead".
FDR tried to spend his way out of the Depression and it FAILED. Henry Morganthau's FDR's Secretary of the Treasury admitted during that time that they spent and spent BUT IT DIDN'T WORK If not for WWII, we may still be in that depression.
We have spent almost 800 Billion Dollars and still have almost 10% unemployment. Business HAS LOST FAITH IN THE ECONOMY BECASUE OF OUR CRAZY SPENDING, THE SPECTRE OF INFLATION AND THE UNCERTAINTY ABOUT THE FUTURE.
Please take the time to listen to FDRs actual fireside chat.. it is incredibly reminiscent of what you want to do now
http://www.bloggybayou.com/2009/07/fdrs-fireside-chat-april-14-1938-new.html
MORE SPENDING WILL NOT WORK.. OUR DEBT IS UNSUSTAINABLE - UNSUSTAINABLE - UNSUSTAINABLE JOHN KEYNES WAS WRONG SO WAS FDR
LETS LEARN FROM OUR MISTAKES.
We have Trillions in unfunded liabilities we must address FIRST
BTW - the criticism is only "poorly grounded" if you decide to ignore the FACTS
Try this on... amongst the austerity measures the EU is pushing Greece to adopt... PRIVATIZE HEALTH CARE AND TRANSPORTATION
What others will find is you don't have any problems with the government spending on things that YOU APPROVE OF, you just don't want them spending on things you don't like.
Well welcome to the club! Its' not very exclusive however since it's made up of all tax paying Americans.
You're right, SHAME ON THEM! HOW DARE THEY!
I for one don't want any government spending on anything except the very basics-security of our nation and law enforcement.
That's it. I'm perfectly capable of busting my butt and getting a degree and interviewing and getting a job and working every day to support myself and my family.
The only thing I'm not capable of is watching other countries thousands of miles away and locking murderers and other criminals up in my community.
Government isn't supposed to do anything more than that. But look what it's become. It's become an entitlement club where it takes the fruits of the few who work hard anymore and gives it to those that seek to dictate how every aspect of our lives works.
That's freedom?
If that's what you want and you support please move out of my once great country and go to a socialist european country. I'm tired of you taking my freedoms away for your "self righteous" idealogues.
I appreciate the difficult job Obama has, and I commend him for the achievements his Adminstation have accomplished to date, but at heart I think he is an incrementalist, and this is not the time for that approach to the economy.
You commend him for deploying more combat troops than we had under Bush, reinvigorating the war in Afghanistan and expending more money in nation building there rather than home?
Buildings, bridges etc were in terrible shape. It makes sense to take care of our own.