Hard Labor
On this Labor Day, about the best the Obama Administration can say (over and over again) is that the unemployment picture would be a lot worse without the Recovery Act. Sorry, that's not good enough. It won't be good enough for the Democrats to hold onto swing seats in next year's midterm election, or for President Obama to persuade increasingly skeptical voters that he represents a solution to economic woes.
In August, the unemployment rate rose to 9.7 percent, and most forecasters think it will be in double digits before year end. In an ordinary recession, employment rebounds last because firms are reluctant to make new hires until they see a substantial pickup in demand -- and this recession is far from ordinary.
The depth of the true unemployment picture has been disguised by large numbers of workers who are on part-time furlough, who have taken pay or benefit cuts, or who are working full-time for part-time pay. The number of workers who had been working for six months or more rose to one unemployed worker in three, the Economic Policy Institute reports. So the economy is stuck in a vicious circle where weak consumer demand is inadequate to power a recovery, and government stimulus spending is not sufficient to make up the difference.
There are three parts to the woes of American workers -- falling wages, rising unemployment, and insecurity about the future. More robust policies could improve all three. For starters, we need a second stimulus bill. It could begin with emergency federal aid to state and local governments that are laying off workers and cutting services in a recession. We also need policies to create more jobs and raise wages for the long term.
Twenty five years ago, I was part of a debate on industrial policy, and I was on the losing side. Neither Democratic presidents nor Republican ones accepted the idea that it mattered whether the United States had world-class industries. After all, we were becoming a service economy, and services were just as good as products. Most economists ridiculed industrial policy on the ground that government was not competent to pick winners and that free markets would make the appropriate investment.
Well, a quarter century later, most of those services turned out to be financial services, and a lot of that sector turned out to be a bubble. The free market made one blunder after another. And ever since the financial collapse that began in the spring of 2007, government has been picking winners with taxpayer money, except that most of them are failing banks. A reading of American history reveals that the U.S. has had industrial policies all along, beginning with Alexander Hamilton's "Report on Manufactures." World War II, the Cold War, and government investment in biotech were one big industrial policy.
Go back and read books from the debate of the 1980s, like Barry Bluestone and Bennett Harrison's The Deindustrialization of America, or Steve Cohen and John Zysman's Manufacturing Matters, and they look prophetic. They lost the political argument, but they were right all along. Now, with the economy facing a prolonged stagnation, a second stimulus should not just be a shot in the arm to restore flagging demand in 2010. It should be a down-payment on serious investment in American manufacturing for a generation.
One piece of good news is that Ron Bloom, the longtime trade unionist and union-friendly investment banker who brought the rescue of GM and Chrysler to a speedy resolution, has been promoted by the Obama Administration to be a kind of manufacturing policy czar. Bloom will have his work cut out for him. For starters, he will be up against an iron consensus favoring "free trade," and an article of faith of the free-trade crowd is that there should be no efforts to promote domestic manufacturing, never mind that every modern industrial power from Brazil to Korea, Japan, and China does precisely that.
Good domestic manufacturing jobs would pay decent wages, but there is a lot more that the government needs to do, since most jobs will still be service sector jobs. As I write in a forthcoming special report of The American Prospect, government has immense unused leverage to hold government contractors to high labor standards. During World War II, the War Labor Board made sure that no employer got a war production contract unless it treated its workers decently. Henry Ford managed to hold out against unions throughout the labor organizing of the 1930s. It was the War Labor board that finally compelled him to settle with the United Auto Workers. Ford was the Wal-Mart of his day.
Later, in the 1960s, before there were the votes in Congress to pass the landmark civil rights acts, Presidents Kennedy and Johnson used the power of federal contracting to demand that any company bidding on a government contract have an affirmative plan to overcome the effects of past racial discrimination in hiring and promotion. This policy was the origin of affirmative action. If government can use its contracting power to promote equal employment for minority workers, then government can surely use that power to insist on decent wages for all workers.
Vice President Biden has made a good start with his Task Force on Middle Class Working Families. President Obama has issued some promising executive orders promoting project labor agreements and making it a bit harder for contractors to bust unions. But the task force is understaffed and does not represent a major administration initiative. To be serious, it needs to be a priority of the President, not just a project of the Vice President.
The Obama administration is on the defensive on health care in part because it is promoting an ambiguous and ultimately feeble health reform bill, but partly because health insurance has become a lightening rod for larger economic fears. Voters are not yet convinced that this president is on their side in the battle for economic security. Major steps to improve job opportunities and wages would be a good place to redeem the popular good wishes that accompanied President Obama as he took office.
Robert Kuttner is co-editor of The American Prospect, www.prospect.org, and a senior fellow at Demos, www.demos.org. His recent book is Obama's Challenge, www.obamaschallenge.com.
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That's right, pulling the economy back from the brink of disaster was nothing. The POTUS has nothing on superman. He should have done that and ensured that all job losses due to economic conditions be immediately reversed or better yet forbidden! And certainly when seats are lost to Republicans in the mid-term elections, the economy will immediately rebound and even exceed that of the most prosperous years in American economic history. And god will still be sitting in the white house because after all if he created the world in 6 days and rested on the 7th, he should be able to reconfigure the economy one a semi-large country in much less time. I am just saying!
"There are three parts to the woes of American workers -- falling wages, rising unemployment, and insecurity about the future. More robust policies could improve all three." This should have been the driving influence from the beginning, instead of the nonsense in saving wall street.,
I recently read a story in the Detroit Free Press about a woman farmer living and farming within sight of Detroit's old Tiger Stadium. She was not the only one. What a sad image of Detroit, the former "arsenal for democracy" returning to the nineteenth century. But this is just the tip of the iceberg. Large areas of formerly expensive suburbs, the Grosse Pointes, are suffering a great decline in value as there are no longer high earning auto execs who can live there. What is not as apparent is the untold story of human suffering. Michigan has a Great Depression-era unemployment rate. . The shrinking opportunities for young Americans to graduate from high school and go into a manufacturing plant somewhere near home has got to be a micro tragedy multiplied millions of times on a macro scale across America. And what about the wokers who had one of those plant jobs for 5, 10, 15 or 20 years, only to see it disappear with nothing remotely similar to replace it? There are literally millions of Americans shut out of semi-skilled, but highly paid, job opportunites making things in manufacturing. This is a story of enforced poverty and heartache on the individual level, and a great, potentially historic tale, of the greatest, most powerful nation in the world, with rather dramatic speed, retreating into second class status.
The loss of manufacturing jobs in America is one of the single most important issues of the day, more important than healthcare, more than cap and trade, topped only by the recession and the wars in Iraq and Afganistan. Manufacturing, that is, making things to sell at home and abroad, is the straw that stirs the drink: it is the basis for working class prosperity as well as for many in the middle class. It is the reason America's governing classes can assess high taxes to finance social programs that help seniors maintain their health and stretch their income. Domestic manufacturing is the mother and father of our cutting edge military hardware, the tools for a strong defense in a dangerous world. The future of American manufacturing is America's future.
Eliminate the small business taxes. If the owner chooses to pocket that windfall then tax them at an abominal rate. If they choose to reinvest in their business instead, more jobs are created. Key is to make pocketing the money as undesireable as possible. Keep corporate taxes, they already have unfair competitive advantages over small businesses, and while this maybe ok for the ecconomy and GDP it is evil in society.
Yes, I believe the way to do it is not to eliminate taxes, but to give small businesses tax incentives, through deductions and credits, to expand, hire new employees, train the untrained and generally provide a growing economy one employer, and one employee at a time.
Governments that promote domestic manufacturing, and governments that pick winners and losers are corporatist, or yes, the f-word, fasc|stic.
K0rea, Ja'pan, Brazi| and China are fasc|st nations which have their governments in control of their industries. It doesn't work in Ja'pan or Brazi|... and we should not try to mimic K0rea and China.
Kut'tner, please stop trying to convince the small children here that using a soft fasc|sm is the way to go. Corp0ratism should be left in the 20th century where it belongs.
Thank you.
Your thinking is as jumbled as your unnecessary weird (coded?) lettering.
We already have a corporatist government. It picks big business over labor, or haven't you noticed?
Years of giving corporation tax breaks to offshore American jobs is coming back to bit them in the butt. You can pay a worker to work or you can pay a worker unemployment benefits to not work. The only ones who have any money anymore are those at the top of the ladder, so you can tax them to pay for it all.
Amen to that!
Why would new manufacturing jobs pay decent wages?
Profits. Generally manufacturing in America used to mean making high ticket items on a mass scale. Manufacturers of cars, planes and trains; washers dryers, refrigerators and stoves: radios, televisions, stereos and other electronics all meant large profits. Through unions, workers organized and benefited by getting a good share of the profits. Even workers who were not organized got higher wages as their employers realized it was in their companies' interest to pay competitive wages with good benefits. Making high-ticket items in American plants would return high paying jobs to unskilled and semi-skilled American workers.
But wouldn't lower wages mean higher profits?
'Recession' and 'blunder'...euphemisms for 'depression' and coldly calculated grand theft...
Amazing the number of folks who still don't or won't understand that 'privatization' and 'deregulation' are and have always been the most efficacious tools with which the tyranny of capitalism; that is, the communism of an elite, using them as lawful bludgeons and impunity-security - abuse and plunder without restraint, conscience and with indifferent callousness the many from whom they extract toil, blood, vitality, sustenance while expecting these same denuned hordes to buy the products (whether service or industrial) they can not afford...while their cronies in government continue to tax and ignore their manifestly, obviously justified pleas of despair.
These problems created by tyrannous government in bed with tyrannous capitalism cannot begin to be addressed until the villainy and gansterism hiding behind self-protective laws is torn asunder. These titles - government; capitalism - just symbols - symbols that materialize and render life unbearable for most of us - it is the venemous issue of these that has to be staunched...What matter what 'ism' or other sign is placed upon the aftermath-reality once they've been expunged? Life is not a matter of laws and symbols...Life is the unknown which can only be lived joyously or mangled woefully by an evil that is created by a few and tolerated by the rest.
Magi, you make some serious accusations, but no concrete examples. It would be good for the discussion if you gave some.
"On this Labor Day, about the best the Obama Administration can say (over and over again) is that the unemployment picture would be a lot worse without the Recovery Act. Sorry, that's not good enough. It won't be good enough for the Democrats to hold onto swing seats in next year's midterm election, or for President Obama to persuade increasingly skeptical voters that he represents a solution to economic woes. "
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Keep in mind this took 8 years to screw up. How is the hell can it be fixed in 8 months. And here you go, media, trying to say WHAT GOING TO HAPPEN IN THE FUTURE. It's high time you all learn that if you could say what IS GOING TO HAPPEN THEN YOU SHOULD HAVE STEPPED FORWARD AND STOPPED IT FROM HAPPENING IN THE FIRST PLACE.
You didn't because you didn't know. And you haven't fixed it because you don't know how too. So stop with the side seat driving, arm chair quarterbacking, even. The best man for the job is on the job.
If what you say were completely true, then virtually no one would have any reason to study economics, law, political science or any of the social sciences. What makes America so uniquely grand, is that it not only allow folks to comment on the body politic, regardless of their status, it actually encourage discussion. Huff Po is a perfect example of robust political opinion in American. By contrast, in Canada, until just lately, a lot of what appears on Huff Po and other similar blogs, could get a person dragged into a special court for "hate speech." You focus on Mr. Kuttner's prediction about how the economy could wreck Pres. O's admin. in 2010. Mr. K is a Dem who very much admires Pres. O and wants him to succeed. The importance of Mr. K's message is that even Democratic economists see the failure of the Pres.'s economic policy. The Pres. made a strategic error allowing Pelosi and Reid to dictate the content of the stimulus bill. And the results are in the current unemployment figures -- up to 9.7% and projected to climb above 10% -- significantly above the 8% the President set as his goal.
"On this Labor Day, about the best the Obama Administration can say (over and over again) is that the unemployment picture would be a lot worse without the Recovery Act."
Maybe that is true BUT if we had of let nature take it's 'business” course by letting those "too big to fail' fail we would have ended this Crisis and got rid of all the toxic overvalued waste, NEW safe banks would have come to fruition AND we would really know the value of ALL our assets, property included. We still don't and will continue to be in the dark until phase 2 of the collapse of a government propped up artificial life support system takes place! When is that? Next year 2010
Dear President Obama: I'm at my wit's end on this health care reform fiasco. I don't think Zen will work. I don't think anything other than single payer will work. It's hopeless. Sincerely, a stocker in the discount store.
Why can't we have a national investment bank, tied to the Federal reserve, that will finance all types of new industries, infrastructure and research, and also extend aid to the cities and states? That is once answer to the problem of out long-term industrial decline.
Mr. Kuttner, I reject your suggestions (money transfers to government employees and imposition of wage controls) offered to solve our unemployment problem. But I support your excellent point that "a second stimulus . . . should be a . . . serious investment in American manufacturing for a generation." You are exactly right. America needs to re-focus on manufacturing. Actually, the first stimulus package should have inaugurated preparations for a world-class manufacturing base, but the dreadful, non-stimulating Recovery Act of 2009 is a subject for another time. I encourage you to pursue the theme of born-again industriaization with all means at your disposal. A leading Japanese industrialist once opined that a nation is nothing if it does not make things. Sentiment to rebuild American industry exists across party lines. Accordingly endeavors should be bipartisan in order to accumulate all possible support. I do not think you could do your country a greater service than to bend all your efforts toward accomplishing your goal of spurring re-vitalization of American manufacturing. Do not be deterred by previous defeats. The issue transcends defeats. I hope to hear soon that you have a new book on the subject as you make the rounds of the cable news shows.
I agree with Megson. An educated electorate who is not afraid of the scare tactics of the "conservative right" would go a long way for greater understanding of issues. Obama can only make suggestions. It's up to congress to make policy. So far, the Repubs and Blue Dogs only seem interested in blocking anything of importance. Too much money to be made from the corporate lobbist world in the way of campaign funds.
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