It is axiomatic that an employed person in the labor force receives compensation and dispenses his earnings for his family's consumption, housing, transportation, medical, education, entertainment, savings and other necessities and luxuries of life. The sum of these expenditures and savings create the cash flow for banks, corporations, markets, investment companies and all of the economic structure of society, however, the building block is employment. If employment falters, the rest will crumble down rapidly. That is where we are at since the current recession that started in 2007.
During the Great Depression of the 1930s, President Roosevelt (FDR) created employment to counter the depression. Eventually it worked and we got out of it.
To address the issue at its core, the Congress of the United States passed the Employment Act of 1946, providing responsibility for the government to maximize employment. However, the Employment Act got stuck with semantics. Maximizing employment was viewed as maximization at given conditions of the economy. Therefore, at bad times maximizing employment could be high unemployment (6% or higher). To rectify this semantic bottleneck, the Humphrey-Hawkins Bill of 1978 was passed.
Given the current economic bottleneck, the main job we have at this point is to add to employment, creating jobs not only for the unemployed but also the underemployed and discouraged workers. That, in fact, is the law in both The Employment Act of 1946 and The Humphrey-Hawkins Full Employment Act was passed, the latter having been signed into law by President Jimmy Carter on October 27, 1978 and codified as 15 USC § 3101.
The current Great Recession which started in 2007 is continuing. It did not end in July of 2009, as claimed by the National Bureau of Economic Research's (NBER) dating committee. The Obama approach thus far is an indirect, roundabout method of coping with high unemployment. It provided assistance to banks and corporations who were expected in turn to stimulate the economy and employment. Obviously the approach is either not working or is too slow for comfort. There is a need o revise the approach and create jobs directly for the unemployed without the middle man. And maintaining full employment of the labor force (94+%) must be the core target of our macroeconomic fiscal and monetary policy, in other words, employment must be considered the basic and most significant unit of economic policy for the short and the long term.
To reiterate, if the private sector is not providing needed jobs then the federal government should be doing so, as the employer of last resort, much as it did in the Great Depression under FDR. President Obama's stimulus program and bailouts have not worked to reduce unemployment substantially, nor has the Fed's stimulative monetary policy including QE2. Many of our other problems of income and wealth inequality, home foreclosures, personal bankruptcies, etc. could be substantially alleviated by significant reductions in unemployment.
Nake M. Kamrany is a faculty member in economics and USC and Michael Intriligator is a faculty member at UCLA.
First, do away with the Bush (and now Obama) tax breaks for the super-rich. There is much more money there than all the republican cuts.
Second, go after the criminals in the financial industry, jail the crooks and claw back ALL the stolen loot. The justice department is not going after the banksters. One would hope that dealing with crimes is for the courts. This is supposed to be a nation of laws. The administration and their justice department refusal to go after financial criminals are in fact enabling criminal activity.
Third, change the tax structure to reflect real contribution to society. Making real products takes investment money, but it also takes a lot of hard work over many years. The end result should not be “investor takes all”. Clearly the supper rich ended up with much while everyone else is suffering.
So there is the money, by the TRILLIONS. But getting it will require fighting back and winning the class war against well financed masters of manipulation and lies.
First is the unpublicized National Security threat of widespread, long-term, power outages as a result of solar flare emissions. The biggest in four years narrowly missed blacking out NY, Washington DC and many other major cities last week! See Green Light at www.aesopinstitute.org to see what might be done and how it can generate jobs.
Second, pass A New, New Deal, as suggested by John Menke on the same website. This uses well proven financial techniques to dramatically boost the economy. At the same time it broadens the ownership of wealth in a manner acceptable to almost everyone.
Finally, pass a Human Investment Tax Credit Program. See it on the same site. The 1977 Jobs Tax Credit used a few weak versions of the incentives and generated 2 million jobs the following year. The program is designed to create up to 6 million jobs and assist 4 million small firms.
This could be a triple play to revitalize the economy. It may be able to get broad political support.
Full employment was achieved during World War II and is possible to achieve once again. But, new tools and new thinking are urgently needed.
A US National Security crisis exists in the hyper-inflationary printing of debt money as the physical production of the economy continues its' collapse.
The federal government must fund the 50 states or each state will cut its' own deal with the bankrupt private sector, creating the lunatic Confederacy.
Speculation and hyper-inflation are in the food supply.
The National Security crisis demands the termination of the usurious, speculative, monetary financial system: Reenact Glass-Steagall standard in US banking, put the Fed into bankruptcy protection, recover the bailout trillions, create the US National Bank that funds the 50 states, then fund the necessary facilities that enhance the population's standard of living. Job mobilization must start immediately. No other options exist.
The power of the US citizenry must be unleashed to create the necessary higher order of existence humanity is demanding, through the science driven reorganization of facilities, resources, and infrastructure. The redevelopment of the North American continent will employ7-8 million Americans, reversing our crisis.
This great endeavor will be replicated throughout the world saving and elevating humanity.
What we're seeing is more like Hoover.
Didn't work out in the 30's, won't work now.................
Those that do not learn from history are doomed to repeat it
The government has zero money to invest because they make no money.. ever. They only take it from someone else, either now or in the future. So they redistribute money, and the taking has a consequence they theorize is more efficient than leaving it with its current or future owner. In all cases except defense and other common good areas, it is not more efficient, not even close.
Much of what FDR did was a disaster, read The Forgotten Man by Schlaes.
And the reason Obama's trillions have not produced anything close to what was advertised is because government "jobs" ruin the economy. If Obama had done nothing, spent not one dime, the economy would be in much better condition now.
When private business WON'T hire, then Government must create jobs through works programs that force business to participate and put people to work.
Then what of Bush and Paulson and their still ongoing multi trillion dollar bailout of Wall Street?
You would agree that giving them our money was money ill spent, right?
However I believe the long-term job forecast will remain bleak unless something is done to counter the move to foreign labor markets, because why would any employer pay an American a living wage when they could pay pennies on the dollar to some sweatshop laborer in china or india?
And so, I say, let them move out of the country. Go ahead and move. But make it clear that you will tax their imported goods to the hilt and then do it. Make it so that a company produces goods in our country that actually compete with their prices.
His predecessor and alternative where and would have been horribly worse
None the less, Obama is a bad President
"It is axiomatic that an employed person in the labor force receives compensation and dispenses his earnings for his family's consumption, housing, transportation, medical, education, entertainment, savings and other necessities and luxuries of life."
But interest expense is a part of all of these but savings, and is not consumable by the employed person or his family. The authors blithely assume that interest payments withheld, diverted to coupon clippers, can increase as a percentage of earnings forever, with no upper limit.
Suppose it rose to 100%? Obviously impossible, because there would be nothing left for consumption. How big is it now? Total US debt, public plus private, is $50 trillion, That's $150K per capita, $600K per family of four, for direct and indirect debt. At 5%, that's $30,000 diverted from the family to the coupon clippers. Are we supposed to increase that, by "jump starting" the economy, to "get the banks lending again?" Can a government "jobs" program succeed in the face of these numbers?
Two questions for the authors: is there an upper limit on total debt, public and private, or can it increase without limit forever? If there is a limit, and we have hit it, what can be done to get total debt down to a level that would permit the economy to recover?
This is the MOST important challenge we as a nation, currently face. Not even the wars come as close to having the universal impact that Jobs and manufacturing in America do.
The ripple effect through our society touches home ownership, health care, retirements, savings, and education--not to mention the rapidly crumbling infrastructure.
We need JOBS, Mr. President. You've healed Wall Street. What about Main Street?
Not true. I am a 99er and a long term unemployed worker. I read HP because this is the only site that addresses the issue of the unemployed better than any website or printed publication around. And I have posted many comments, whether they are in reponse to excellent, crazy or anywhere in between solutions about solving unemployment, regarding the articles such as this one. So trust me, I am a regular reader of this site despite my situation.
Oh, BTW, your points are excellent, but right now the middle class and the unemployed, especially those like myself, are pretty much dog poop to many politicans. All you need to do is listen to the Walkergate tape highlights and you will get an idea of what many, especially those on the extreme right, think about us.
Oh yeah, nice to make your acquaintance.