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Robert E. Prasch

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President Obama's Speech and the Unemployed: Why Now?

Posted: 09/04/11 08:30 PM ET

With Labor Day here, football season is upon us and the baseball playoffs are around the corner. Yet the buzz in Washington D.C. is all about the President's forthcoming speech on unemployment. Undoubtedly, sports coverage will be detailed and in-depth. History, fact, and causal statements will feature prominently in the discussion. By contrast, coverage of the speech and any ensuing legislation will be devoted exclusively to personalities, party rivalries, and the conflicts between them. The unwritten rule will be "he said - she said." But for those of us not living in the District, a serious question remains -- why this issue and why now? After all, it has been evident for some time that we are experiencing a jobless recovery and neither the administration nor Congress has demonstrated a sustained interest in unemployment. But to grasp the full severity of the problem, we should closely examine an important statistic -- the unemployment rate.

As I type this essay, I am sitting next to a bowl of fruit. The quantity can be readily counted as we all share an understanding of the term "fruit." By contrast, who is or is not unemployed is more complicated as it is mediated by two important considerations. The first is politics. Incumbent politicians, the wealthy, and "free market" oriented economists generally push for a narrower definition and smaller number. The second problem is associated with agency or intention. Who is, or is not, working? Of those not working, who really desires to find work?

Consider a laid off young woman who, after months of futile and frustrating search, has decided to "make lemons out of lemonade" by reducing her expenditures, spending more "quality time" with her children, and taking some night classes. Is she "unemployed"? What of the young college graduate who can find only a few hours of clerical work through a "temp" agency while searching for a more suitable position? Or what of the recently discharged Army veteran living with her parents and helping out in the family business while continuing to look for a job? Are these persons "unemployed"?

Stated simply, the unemployment rate is the number of those able and willing to work divided by the entire labor force. The Bureau of Labor Statistics (BLS) looks to three very specific questions before determining that someone is "unemployed." First, did you work for wages, if for only a single hour, during the previous week? Second, did you perform unpaid work for a family business? Third, are you "actively" seeking work, that is to say have you been contacting employers, sending out resumes, and going to interviews over the previous several weeks? You must be able to answer "no, no, and yes" to these questions to count as part of the labor force yet be "unemployed."

By this standard it is unlikely that the persons described above would be classified as officially unemployed, although all three would likely accept a full-time job if one were available. Indeed, by some estimates over half of all jobs created during the past several economic expansions were taken by persons who -- statistically speaking -- were not part of the labor force. As a "rule of thumb," it is a fair guess that the actual rate of unemployment is three-quarters again (1.75x) as high as the official or "headline" rate (BLS calculates a less-known data series called U-6 that validates this estimate). So, for example, with today's official rate at 9.1%, it is reasonable to guess that 15.9% of the labor force is un- or under-employed (the U-6 number for August 2011 is 16.1%). This, then, is the context that best interprets the current "headline" rate of unemployment. It is, to put it mildly, a narrow definition that leaves out many people who we would usually consider unemployed. Contemplated alongside other numbers, it is evident that many American families are in desperate straights -- and the situation is getting worse. Thirty percent of America mortgagees owe more on their home than its market value. As this percentage is continuing to rise, it is increasingly made up of "prime" borrowers. An amazing fifteen percent of all Americans are on foods stamps, including one-quarter of all children. This number is also rising. With so many families in such precarious condition, can anyone be surprised that wages are stagnating, unionization rates are declining, and the distribution of income is worsening?

This brings us to President Obama's speech. Why now? After all, unemployment has been high since the day he took office. Actually, it rose initially and has remained high since. Early in his administration there was a half-hearted attempt to provide a "stimulus" to the economy, but the program was -- even then -- widely understood to be too small and too-heavily weighted toward tax cuts to be effective (For a criticism of tax cuts for the wealthy as an employment strategy see here). From the start it was evident that the administration's core approach to the economy was to do whatever was necessary to support Wall Street's largest and most irresponsible firms through thick and thin. The idea, if we can call it that, seems to have been that "trickle down" or the "invisible hand" would take care of the unemployed. So again, why now?

At first glimpse, it is reasonable to suppose that the President and his advisors are sufficiently worried about the upcoming election to actually do something for the unemployed. This would be prudent, as a reduced level of unemployment is a good predictor of an incumbent President's reelection prospects, although an important exception was President Reagan in 1984. But, if this were the motivation, one might suppose that the administration would select a plan or plans that could conceivably get the job done (For such a program, see here). Yet, it is evident that the set of programs and policies that early reports suggest are being cobbled together are either symbolic (such as a "workfare" requirement for unemployment insurance that has been pioneered in Georgia), or too small (the proposed infrastructure expenditures), or too long-term (the so-called infrastructure "bank"), to make much of a difference. Worse, their modest effectiveness is certain to be swamped by the negative impact on employment that can be anticipated from the deficit "deal" that the President negotiated earlier this fall (Dean Baker has an astute criticism of the likely content of the proposals). Moreover, we know that a serious effort to address unemployment would require a confrontation with Congress while simultaneously discomforting the President's friends and supporters on Wall Street. As we have seen repeatedly, he instinctually defers to the latter on economic matters. Hence, the idea that he plans to do something sufficiently drastic to tangibly change the unemployment numbers before November 2012 simply fails to tell us "Why now"?

By process of elimination, we can only infer that the President's agenda is symbolic and hence political. If so, what political ends might be in view? Being on record as "caring" about unemployment is always good, but President Obama and his advisors have often spoken of their "concern." A need to reiterate it does not, on its own, explain this new political initiative. It stands to reason that there must be another explanation. Perhaps it is designed to be a distraction. If so, from what are we being distracted? The answer, while admittedly speculative, is most likely "Free Trade."

It is common knowledge that the White House plans to submit three completed "Free Trade" agreements to the Senate this September -- South Korea, Colombia, and Panama. (As always, these treaties are primarily about guarantees and protections for financial and investment flows, restrictions on intellectual property, and related issues. But exploring their content will have to await another post.) With a remarkable sense of timing, the administration also plans to mark Labor Day 2011 by opening multi-party talks on a Trans-Pacific Free Trade Area. (Trade negotiators, lawyers, lobbyists, and hundreds of corporate honchos are invited to these talks -- critical economists, civil society groups, and the public are not.) The President's "voter base" is firmly opposed to these secretive and largely detrimental deals, as is the bulk of the American public. This opposition would most likely intensify if the public were fully briefed on their contents. Simultaneously, there is no question that the President's "donor base" is highly enthusiastic about these deals -- after all, they were in the room when the details were hammered out. Wall Street, the Chamber of Commerce, and the National Association of Manufacturers are beside themselves with excitement. The treaties promise extraordinary protection of financial and investment flows, innumerable exemptions from regulation, new and lucrative opportunities for off-shoring jobs, and political recognition and validation of the absence of labor protections and union rights that is a characteristic of most of these nations and regions. K-Street lobbyists can look forward to high fees and lavish banquets during and after the Senate vote. Big agricultural intermediaries look forward to crushing South Korean farmers with their heavily subsidized produce. This year, Colombia is on track to outperform its 2010 record of murdered unionists. If you're a plutocrat or one of their paid representatives, what's not to like?

My conjecture is that the forthcoming speech and any accompanying legislation was and is intended to provide political cover and a welcome distraction throughout the passage of these "Free Trade" treaties. As during the Clinton years, the treaties will be presented -- with meticulous dishonesty -- as jobs programs (For a glimpse of the scale of this dishonesty, consider that Panama would have to multiply its consumption of American-made goods twenty-fold to import as much as it currently exports to the United States. Even then, their total imports would have no discernible effect on our economy). Handled properly, the Washington press corps and the public could be induced to blur the distinction between a set of largely ineffective jobs programs and the proposed trade agreements. After all, the reporting is certain to downplay analysis while highlighting rancor and noise. My best guess of the end result is that the Republicans will succeed in stripping away what little is of value in the jobs programs while allowing the trade agreements to remain standing as part of some sort of "grand bargain." President Obama will then -- alas -- be "forced" to sign both. This would allow the trade agreements to become law, while minimizing the administration's "footprint." For the White House, this would be a highly desirable outcome as all early signs suggest that this is shaping up to be an election that will marked by a deafening lack of enthusiasm from rank-and-file Democrats.

President Obama's apologists will, of course, woefully complain that those crafty Republicans -- once again -- out-foxed him. Those of us who suspect otherwise will be chastened publicly. Who, the taunts will proclaim, are you going to vote for in 2012? Consider what would happen if the Republicans were to win. They would continue the Middle East wars, pursue drone attacks across the globe, expand and entrench the surveillance state, pander to the failed bankers of Wall Street, coddle Too Big To Fail financial institutions, run cover for gigantic and irresponsible polluters such as BP, pass unpopular and detrimental trade legislation, or continue to neglect the environment and the unemployed. And I agree, it would be disastrous if the Republicans were to pursue such an agenda. Happy Labor Day.