Where Will the Jobs Come From?

They are popping the bubbly on Wall Street. Million dollar bonuses; the Dow at 10,000; the casino is open again. Forget President Obama who says we can't go back to an economy where finance pockets 40% of the profits. We're already headed there.

The current account deficit is down as Americans have cut back spending. But the deficit with China is hitting new records; companies are still shipping manufacturing jobs over there. The dollar is down, but not against the Chinese currency. Forget about Federal Reserve Chair Ben Bernanke who warns against going back to the unsustainable trade imbalances that led us over the cliff. The old patterns are coming back.

Bernanke has announced that the recession is over, the recovery has begun. But to date, we are looking at a reversion, not a recovery. We've stopped the free fall, but we haven't changed direction. There can be no recovery to the old economy that crashed when the housing bubble burst. That economy depended on Americans spending more then they earned, borrowing ever greater amounts, treating their homes like at ATM machine, while the Chinese lent us the money to keep interest rates down so we could buy the goods our companies made with the jobs they shipped over there.

Now that old economy didn't work very well when it was growing. We lost high wage manufacturing jobs during the supposed "recovery" under Bush. Most Americans lost ground even while the economy was expanding. Household debts reached new highs. Inequality soared to Gilded Age extremes.

But now we can't even get back to that performance. Americans have lost some $13 trillion in assets. They are tightening belts, trying to pay down debts, terrified as jobs are lost, hours cut, benefits slashed. Consumers won't drive the US economy, much less the world's. And businesses aren't investing because consumers are cutting back. They are increasing profits by laying off workers and cutting back expenses. States and localities are headed into severe layoffs of teachers and police. The economy isn't going to be buoyed by soaring exports to a world in recession. The only thing holding the economy up now is the deficit financed stimulus plan and the automatic stabilizers like food stamps and unemployment benefits.

Where will the jobs come from? Wall Street can produce another bubble, but that won't put the 15 million without jobs to work, one third of which have been out of work for at least six months.

Recovery requires fundamental reform of America's economic strategy. The old shibboleths of the conservative era - small government, cut top end taxes, free multinationals to move jobs abroad, deregulate finance, war on labor unions, trade deficits don't matter - have failed ignominiously. They must be discarded, like yesterday's rotted fruit.

Fundamental changes are needed. Trickle down should be supplanted by public investment led growth - large scale public investments in areas vital to our future like infrastructure, research and development, education and training. These investments should be deficit funded until the economy actually starts putting people back to work, and then sustained and paid for through progressive tax reform. Tax speculative security transactions, generating $100 billion a year in revenue to invest in a 21st century infrastructure that would put people to work and make the economy more productive. Raise top end taxes, reduce inequality, and invest in making college affordable or exploring the green technologies of the future.

We've pursued tax cuts, promising private investments would flourish. But much of the productive investment and lavish consumption went abroad. In reality, public investment would be far more effective. We have a staggering public investment deficit that must be met for a world efficient economy. Public investment is more likely to be invested, more likely to be spent here, more likely to create good jobs here, and far more likely to generate new technologies and productive private investments.

We need to complement this with a bold manufacturing strategy to make certain that we help lead the inevitable green industrial revolution, so the new technologies will be created and made in America. Shed the notion that we'll benefit by exporting windmills and solar cells and electric cars subsidized by China so that they are cheaper to us. We can't exchange dependence on foreign oil with dependence on foreign made windmills. Make the public commitment to transition, and then use our purchasing power to invite the companies with the best technology to bid on contracts so long as they make it here in America. Not simply a timid buy America policy satisfied with the final assembly of parts and technologies made elsewhere, but moving entire supply chains so that our workers and engineers and entrepreneurs are familiar with cutting edge technologies that our inventors can soon surpass.

Complement this with a new global trade strategy. We can't go back to current account deficits over 6% of GDP, financed by borrowing from abroad. China, now some ¾ of our manufactured goods deficit, is by far the hub of the problem. The President has wisely called on the international community to adjust cooperatively, challenging the Chinese and other mercantilist nations to expand domestic demand and reduce their reliance on exports, while the US exports more and buys less. But that isn't going to happen so long as the Chinese are free to manipulate their currency, subsidize their exports, savage their workers and environment, and mandate global corporations transfer jobs and technology to them. So we'll need to show some bite. A bold manufacturing policy around new energy will encourage companies, including Chinese companies, to make things here. But we should be debating putting a lid on our deficits, and announcing that we will move slowly to balance our trade. If all adjust, we can have more trade, not less, but we can't go back to the old imbalances no matter what they do.

These must be complemented by financial reform that curbs the gambling and forces banks to make loans to Main Street again, and by a high wage policy - empowering workers, lifting the minimum wage, extending the public social contract. Finally, our economic policy - both monetary and fiscal - must be targeted at sustaining full employment as a priority, without letting inflation get completely out of control.

These ideas - heresies in the old conservative times - are but the beginning towards defining a new course. They will face fierce resistance from entrenched interests. But perhaps the biggest obstacle is the encrusted hold of old, bad ideas that should already have been discarded. You can see that in the calls for balancing the budget and cutting spending while unemployment is reaching new heights. Or the Republican chorus about cutting taxes, as if they had learned nothing. Or conservative Democrats railing against limited buy American policies. Or the administration proclaiming its opposition to industrial policy. Or conservatives railing against excessive regulation.

Inertia and interest drive us to revert, not reform. Only it won't work. The old standards don't play anymore. Sure, Wall Street can generate another bubble or two. But there is no recovery on that old path - only stagnation, crushing long term unemployment, growing inequality, a devastated middle class and a social tinderbox increasingly ready to explode. Eventually, we'll have to change our course - the only question is how much pain we have to endure before we actually learn our lessons.

 

 

Comments

[robbie90230]

It's interesting reading about where jobs will come from on a site that relies heavily on volunteer contributors to fill its pages.

[seawolf77]

What did Rodney Dangerfield say in "Back to School" . Fantasyland.

[JBGabriel]

Great piece Mr. Borosage!

Pat Choate, Ross Perot's VP Nominee back in the 90's also mentions "state capitalism," or state managed capitalism in his book "Saving Capitalism­." As Americans, we look down at and get our underwear in a bunch when we consider allowing the government to get involved in our capitalist system. We fear the inefficiencies of central planning. However, we may need to change our thinking because the countries like China, Japan and Korea that promote state sponsored capitalism are increasing their trade surpluses and global economic clout at America's expense. Come to think of it, I don't think the Post Ofiice is nearly as badly run as Citigroup and AIG for example. I am fearful of government involvement, but I believe it is necessary to pump money into green technologies like power generating wind mills so we can get our manufacturing sector moving again.

[mikekopac]

Bold manufacturing strategy..­......HA

how many windmills did this great nation manufacture last year?

What did our government do in the past year to encourage windmill production?

The answers to these questions are at the heart of the problem...­.NO ONE WITH POWER CARES ABOUT US...AND NOTHING happens

[Roz0804]

3. Greed is killing us on this front! Every big company that has taken their manufacturing business and call centers to foreign countries should have huge fines levied against them. Everybody is not a college graduated. Some people work with their hands and are gifted that way. They need jobs that can let them make decent wages $15-$20 and hour. Then they could have the luxury of affording to buying homes and keeping a roof over their family’s heads.

This is not rocket science folks! This is common sense. This is the only way we are going to bring this country back from the brink of doom and gloom!!!!!!!

[Roz0804]

You asked the question, do you really want an answer?

1. Bring our fighting men and women back home. Pull out of Iraq and Afghanistan. 8 Years is long enough. We can defend our homeland from right here. Also as long as we are in the area Bin Laden will never come out of hiding. We can use counter intelligence and Special Forces to capture or kill him once he feels comfortable and comes out of hiding.
2. Greed is what’s killing us! Housing needs to come down to a reasonable level that people can afford. Certain zip codes should not be allowed to charge huge amounts for rent in apartments and houses. By bringing the prices down it will allow people to afford their own homes to live in and not have to fill up shelters or have to live out of their cars. This is the United States of America folks! Working at Wal-Mart making $7-$10 and hour will not let you afford rents from $500-$1000 a month. The owners of these properties are so busy trying to make a profit that they have priced the average Americans out of being able to afford a home for their families. We need RENT CONTROL folks!

[Cosatjockomo]

Carbon nano-fibers is the industry of the future. Raw materials would be derived from converting CO2 into carbon and O2. That's right it'll actually REDUCE CO2 in the atmosphere! The fibers will replace anything we use fiberglass, iron or steel for, with the exception of electrical transmission. That will lessen our dependence on foreign oil and the Japanese monopoly on high quality steels will mean nothing. Construction can boom without destroying the environment and the lighter weight materials will enable revolutionary building designs. Our government should be investing billions into the development of this technology in order to take the lead on the rest of the world.

[myxzptlk]

Cut our obscene military budget and redirect the energies of non-essential arms manufacturers and contractors to rebuilding US infrastructure.

[omobob]

The jobs are gone and thy are not coming back. The US does NOT manufacture much of anything anymore. If it wasn’t for computer chips we’d be in worse trouble. We don’t even buy our own cars? This recession is a major adjustment to a bloated and weak economy. We have out sourced everything to China, Malaysia and India. There are no jobs to rehire stranded workers.

[Denalidog]

"Public investment" is just a euphemism for communism. "Public Investment" is just taking the taxpayers' money and awarding it to political favorites. Whoever is chummy with those in power will get the money, and everybody else gets the shaft. Unions and mobsters historically have the most to gain from "Public Investment­." "Public investment" tends to disappear, with no appreciated benefit to the public. Anyone who has traveled the roads of Illinois can guess where highway funds have gone in that pot-hole ridden state.
The best way to stimulate the economy is to cut government spending and taxes.

[omobob]

""Public investment" is just a euphemism for communism. "Public Investment" is just taking the taxpayers' money and awarding it to political favorites.­" So is it jingoism or communism. Because it can’t be both? What does ""Public investment" have to do with the proletariat controlling the means of production? Communism, socialism and Marxism is thrown around a lot today with no knowledge of what these sociopolitical constructs mean.

[considerthis]

So then, answer the question pp WHERE ARE THE JOBS?

[Chic Bowdrie]

The jobs come from the new products and services provided by opportunity for the entreprenuers (sp?) to make some money. When taxes and overhead (like health care and Cap and Trade) are high, it discourages those new businesses.

[1n1n1makes3]

Yes, when the taxes are high it discourages smart entreprenuers, but on the other hand many smart entreprenuers avoid markets that rely to heavily on subsidies. Investors and entreprenuers choose markets that allow for sustainable growth.

Professor John Byrne, PhD., 2007 Nobel Peace Prize winner and distinguished professor at University of Deleware is one of the world's leading experts on sustainable policy for environmental and energy policy.

Professor Byrne, leaders from the Energy Administrations of MD, DC, VA and DE, and 45+ other speakers are coming together to discuss creating a sustainable marketplace and sustainable job growth through primarily solar energy but also through other renewable energy and energy efficiency incentives, policies and strategies.

If you're interested in learning from some of the foremost experts on green jobs and on creating new sustainable markets here and abroad, you should attend. The website is:

www.mdvseia.camp7.org

[overd0g1]

The government is trying to create another bubble by artificially suppressing interest rates and other "stimulus" measures.

[desktop]

I was one of the few against any financial institution bailouts. I knew this would take the country into a depression and massive unemployment. But it would have caused tremendous political change. People would have been ready to vote in change just as they did in FDRs time. That is the kind of pain we needed to get people to see what is going on. As it is, we have propped everything back up and we continue on Reagans path of slow trickle down destruction, bit by bit until a new generation just turns on their FOXnews channel and believes this is just the way it is.

[Haditup2here]

I have been asserting the fact that the federal deficit could not be paid down by continuing to have a trade deficit. However, that concept has never seemed to be grasped by those generally against manufacturing jobs and some of the economists trained by elite institutions such as Harvard.

[Dinlo]

What Mr Borosage is proposing here is, I believe, called a command economy. The likes of Reagan, Thatcher, Murdoch, Friedman and Hayek told us that it didn't work, yet as Paladin2 states above, in 1974 middle Americans was doing very nicely out of it. The Chinese don't seem to be doing too badly out of it either at the moment.
I remember well the American tourist of the 60s and 70s, wallets bulging with cash, to be found just about anywhere in the world. Where are they now I wonder? At home on welfare? Oh the joys of the free market and trickle-down! We've all been sold a lemon.
Look, I'm not an American, but I believe that the world needs a strong America, and that on balance, the last decade aside, America has been a positive force in the world.
The American public really needs to wake up and realize that it has been hijacked by what is effectively a plutocracy, and take steps to reclaim the Great Republic before it is too late.

[Chic Bowdrie]

In 1974 we were suffering from price controls leading to long lines at the gas pumps, double- digit unemployment, double-digit inflation, and double-digit interest rates. Just because the rest of the world was worse off doesn't mean we should reinstitute a command economy, whatever that is. Anyway, at the rate we are going, tourists will be coming here not the other way around.

[jazzdad51]

Excellent article. There will be no fast food fix for job creation in America, which is the missing gear in this recovery. However, America has a great opportunity to begin a new industrial revolution that will propel the human race into our next age. I can vision homes being built entirely out of solar panels. Roofs, siding, even windows and doors. This will be the housing market which is the center of our economy. Changing the world from petroleum based energy to green energy is the solution that is finally being forced on us but it is several years away. Of course there will be those opposed and prefer to drill baby drill. But why should we give the oil companies what they want.