The Reverend Al Sharpton and various labor unions have announced a March for Jobs. But I'm afraid we'll need more than marches to get jobs back.
Since the start of the Great Recession at the end of 2007, America's potential labor force -- that is, working-age people who want jobs -- has grown by over 7 million. But since then, the number of Americans who actually have jobs has shrunk by more than 300,000.
In other words, we're in a deep hole and the hole is deepening. In August, the United States created no jobs at all. Zero.
America's ongoing jobs depression -- which is what it deserves to be called -- is the worst economic calamity to hit this nation since the Great Depression. It's also terrible news for President Obama, whose chances for re-election now depend almost entirely on the Republican party putting up someone so vacuous and extremist that the nation rallies to Obama regardless.
The problem is on the demand side. Consumers (whose spending is 70% of the economy) can't boost the American economy on their own. They're still too burdened by debt, especially on homes that are worth less than their mortgages. In addition, their jobs are disappearing, their pay is dropping, their medical bills are soaring.
Consumer spending slowed again in August as incomes dropped.
Businesses, for their part, won't hire without more sales. So we're in a vicious cycle. The question is what to do about it.
When consumers and businesses can't boost the economy on their own, the responsibility must fall to the purchaser of last resort. As John Maynard Keynes informed us 75 years ago, that purchaser is the government.
Government can hire people directly to maintain the nation's parks and playgrounds and to help in schools and hospitals. It can funnel money to help cash-starved states and local government so they don't have to continue to slash payrolls and public services. And it can hire indirectly -- contracting with companies to build schools, revamp public transportation and rebuild the nation's crumbling highways, bridges and ports.
Not only does this create jobs but also puts money in the hands of all the people who get the jobs, so they can turn around and buy the goods and services they need -- generating more jobs. Not exactly rocket science.
But congressional Republicans are firmly opposed. Why don't Republicans get it? Either they're knaves -- they want the economy to stay awful through next election day so Obama gets the boot. Or they're fools -- they've bought the lie that reducing the deficit now creates more jobs.
Republicans claim businesses aren't hiring because they're uncertain about regulatory costs, or their taxes are too high, or they can't find the skilled workers they need. But if these were the reasons businesses weren't hiring -- and consumer demand were growing -- we'd expect companies to make more use of their current employees. The average number of hours worked per week by the typical employee would be increasing.
In fact, the length of the average workweek has been dropping. In August, it declined for the third month in a row, to 34.2 hours. That's back to where it was at the start of the year -- barely longer than what it was at its shortest point two years ago (33.7 hours in June 2009).
Republicans say America can't afford to spend more. In truth, we'll be in worse shape if we don't. If the economy remains dead in the water, the ratio of public debt to the total economy balloons.
Besides, the United States can now borrow money from the rest of the world at fire-sale rates. Interest on the ten-year Treasury bill is now under 2%. That's an almost unprecedented deal. With so many Americans unemployed and so much of our infrastructure in disrepair, this is the ideal time to get on with the work of rebuilding the nation.
But it won't be enough for government to become the buyer of last resort -- in Keynes's words, to prime the pump. If the economy is to continue to grow and create jobs after the government has stopped the priming, there must be enough water in the well. Yet, now and in the foreseeable future, America's vast middle class doesn't have the purchasing power to keep the mechanism going.
For more than 30 years, the median wage in America has barely increased, adjusted for inflation - even though the economy is twice as large as it was three decades ago. Almost all the gains have gone to the top -- especially the top 1%, who now receive over 20% of total income (it was just 10% in 1980).
As long as America's vast middle class could continue to borrow on the rising value of their homes, they continued to spend -- thereby keeping the economy going. But going deeper into debt is not a sustainable strategy. Now, after the bubble burst, America's middle class doesn't have enough money to maintain the economy at or near full employment.
Any long-term strategy for rescuing the American economy must therefore seek to reverse the widening gap in income and wealth. One place to start is tax reform. The earned income tax credit -- a wage subsidy for lower-income workers -- should be enlarged and expanded. Taxes on the middle class should be reduced -- including social security payroll taxes (80% of Americans pay more in payroll taxes than they do in income taxes).
Taxes on the wealthy, on the other hand, should be increased. The president has proposed closing some tax loopholes that allow the super-rich to reduce their tax liability, and to end the tax cut on the rich put in place by George W Bush in 2001 (thereby increasing the top marginal tax rate to what it was under Bill Clinton -- 39%).
But the nation should go much further, particularly in light of the large budget deficit projected several years from now. We need more tax brackets at the top, with higher marginal rates. The capital-gains tax (now at 15%) should be raised to match the income tax rate. And a wealth surtax of 2% should be applied to all wealth in excess of $7 million.
Needless to say, Republicans won't go along with anything like this. They balk even at the president's modest plan.
It would be better for President Obama to assume that he will get no Republican support this year and next, and build his 2012 election campaign around a bold plan to revive jobs and the American middle class -- and end the American Jobs Depression.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Follow Robert Reich on Twitter: www.twitter.com/RBReich
James Zogby: Voters Are in a Deep Funk
Dean Baker: Bill Clinton Is Baaaaaaaaack!
Reich says, "When consumers and businesses can't boost the economy on their own, the responsibility must fall to the purchaser of last resort."
WRONG! Our government HAS NO MONEY. In fact, it has TRILLIONS OF NEGATIVE MONEY. And it shows little sign of doing anything to change that.
Here's why having the government hire people, giving money to state governments, or contracting construction (now) is a bad idea. Our government is in massive debt because it spends more than it takes in. By hiring people, the government takes on an additional expense. It must make that expense up. Taxes are how you make expenses up. However, since that worker is employed by the government, the government takes a loss on hiring that worker. For this reason, the government should hire as few people as possbile, because the only way to boost its revenues is to have taxpayers employed by non-governmental groups (business, corporations, etc).
Reich forgets that this is the 3rd stimulus. Why didn't the first two work?
The one thing that Reich said that makes sense is this: " But going deeper into debt is not a sustainable strategy." If pertains to middle class Americans, why doesn't it pertain to the federal government?
The solution for this country is REDUCING the size of our Leviathan and letting capitalism back into our country. NOT in growing government indefinitely.
Massive cuts in taxes on capital (the 1997 Taxpayer Relief Act)
Cutting spending below 19%/GDP
Deregulation
Lets face it : Spending money on the welfare of Americans expands government . Enhancing corporate profit does not . Just the cost .
The Federal Reserve places the consumer debt figure at somewhere around $3 Trillion dollars. Of this, it is estimated that roughly 33% is credit card or revolving debt, 66% is non-revolving debt. Tis is restricting consumer spending and bank lending.
What if we allowed American’s to take a one-time deduction of 30% of their 401K/IRA retirement money (currently estimated at $3 Trillion dollars) to pay down consumer debt and refinance their mortgage debt with only paying FICA at 7.65 percent (no cap)?
Banks would see an infusion of nearly $1 trillion in cash and could immediately put it back out as debt under new terms and eliminate their high risk debt.
Consumers would see a decrease debt payments and would be more able to spend more. This would create growth and jobs as industries ramp up again. The housing and construction market would see a boost as borrowers could sell and buy as their credit score would improve.
In short with the current 401K in a loss anyway, why not use it in a debt reduction mode if there is no penalty and access is below even the long term capital gains tax rate.
It is the consumer bailing himself out with an injection of almost a $1 Trillion dollars at the route of the problem. It would also provide investment opportunity in reinvigorated companies and sectors with a basis in real growth and positive fundamentals.
I learned many things, starting with - 1/2 of all income isn't subject to income tax at all! [Because of deductions, deferrals, exclusions. And, guess who gets those breaks.] And, the amount lost to these tax breaks is about a trillion a year. A trillion a year. Lost.
Would love to see book clubs formed to discuss this book.
The answer lies in laying the legal foundation for our employment system that relieves companies of the onerous burden of being the only fiduciary agent for funneling employment tax revenues to the Government and frees workers to independently pursue employment opportunities for which companies are willing to engage them. We need a Universal Employment policy that creates organic jobs growth based on economic reality. Such a policy will permit more workers to be engaged by employers under alternative work arrangements while giving workers full protection of employment/labor laws. More workers paying employment taxes will generate badly needed tax revenues for the Government. Tax revenues are managed by an alternative fiduciary that functions as the traditional company.
Considering you guys are attempting to "fundamentally transform" this country to the European socialist model, I would say the Democrats have become the raucous, extremist faction.
Because of liberalism we now have a large number of Americans who are encouraged to look to a powerful central government for their sustenanceÂ, their survival, and the guarantee of a nebulous concept of "fairness.Â" The left, once in control of the Democratic Party, was able to accelerate its takeover of all levers of government by portraying itself as the protector of the oppressed and guarantor of equality in exchange for the votes of an increasingÂly and deliberateÂly ill-educatÂed citizenry.
Under the banner of "progressiÂve thinking," a plurality of the American population has arbitrarilÂy rejected the fundamentaÂl concepts that made the United States the most successful country in the history of mankind: respect for the uniqueness of each individualÂ, and self-deterÂmination.
The death of over 50 million since 1973 from legal abortions, the open promotion of euthanasiaÂ, the abandonmenÂt of traditionaÂl behavioral guidelinesÂ, and the active denigratioÂn of religion, together with the successful indoctrinaÂtion of the entitlemenÂt mentality and its concurrent belief in an all-powerfÂul governmentÂ, have unalterablÂy frayed the ties that bind all Americans and greatly eroded the ability of the society as a whole to successfulÂly weather an overwhelmiÂngly severe financial or societal crisis like the current recession.
We are witnessing not the excess of liberalism but rather thirty years of kicking the can down the road. Since when did fixing roads, providing social safety nets to the undeserved, poor and elderly, investing in America in terms of education and public health became targets of the gilded class. As robert's book and blogs point out, wealth disparity is the major factor which as crippled this economy.
When people have a job with decent wages, can feed their children, and have a decent home and leisure time, self determination is not an issue. But the rules of the game have been long stacked against the middle and lower economic classes, that what you are witnessing is the excess of capitalism and the free markets combined with the immorality of me first you never.
Rugged individualÂism is entirely irrelevant, since capitalism, itself, is based on a massive interchange between many individuals.
The distinction lies in the fact that such exchanges under capitalism are freely arrived at, whereas government is FORCE (remember Washington's admonition?) and used by those who seek to force their views upon others under the rubric of "caring", when all that they really care about is power and its abuse.
Well, now you've hit on the key issue--"and consumer demand were growing." Consumer demand is NOT growing. These businesses have taken away the ABILITY of consumer demand to grow by taking away the WAGES that pushed the DEMAND. It isn't that they can't find the skilled workers they need, it's that they can't find the skilled workers at the PRICE they need. Regulatory costs and taxes? No matter the rate, they don't want to pay it, it's an expense.
Businesses will go from country to country, always cutting from the bottom, trying to get the most profit from their product, and in the process cutting their own throat. Product sales are down, it's already started. How do you sell your product to someone with empty pockets?
Yes, it gave us a slight bump in some economic numbers until the money ran out and it helped a few people keep their jobs for an extra year. It didn't fix the problems with the economy or bring about any long term investment or growth.
So you still believe that following Keynes is the answer despite not even being able to point at the 2009 Stimulas as a success.
What's left out of your column is more important that what you included.
The destroying of American manufacturing and their decent paying jobs began 30 years ago with Reagan bursting of Faa union, supply side trickle down policy radical republican policy( which said I will cut your taxes to corp.,you will give middle class a job) and the unfair trade arrangements..
I wish Congress would do tariffs but I do not see them doing anything to protect American jobs.
What can we do,, if we stick together and pass the word??
Do not buy new products from multi-national corporations who fired you and hired Chinese/others.
Squeeze their profits by letting them sell to their workers wherever are.
Remember Henry Ford he said he would pay his workers enough to buy his cars and create demand. Are you getting any money from these guys??
Even if you are retired or a government worker like teacher/police you need to stick with all workers., If the 70% of workers without college degrees do not have a decent paying jobs, they will not pay taxes and then you will not have a job either.
They will not be paying much in medicare taxes either.
If you cannot find a new Product MADE IN THE U> S> to buy....
Buy the product used from neighbors, charity shop, small business, craig's list. Keep your money circulating locally.
Do not send your money flying into the multi-national corporation pocket and to China by buying new from them.
The biggest problem I see in a return of manufacturing everyday products here at home (MetricMind post below) is that we no longer have the ABILITY to manufacture these products in the US. When these companies left the country, they left behind empty buildings which are now in disrepair and not up to code, and if they left behind machinery, it is out-dated, unsafe, and/or unusable. Basically, it will be expensive to return manufacturing to the US.