This is not a recovery. It's a continuing jobs emergency and it demands action.
We learned this morning that unemployment rose to 9.8 percent in November and employers added only 39,000 jobs. Private employers added 50,000 -- the smallest gain since January. Government employment continued to shrink.
We're heading in the wrong direction. In October, the jobless rate was 9.6 percent, and employers added 172,000 jobs. Private-sector job growth totaled 160,000. At this rate unemployment won't return to its pre-recession level for more than a decade, if ever.
Over 15 million Americans were jobless in November. This doesn't include those who are working part-time but would prefer to work full time. Nor does it include a record 1.3 million who are too discouraged even to look for work. Nor does it take account of the fact that most families are dependent on two breadwinners. So to figure out the true impact on most families, all these numbers have to be doubled.
Nor does it reflect the fact that the level of unemployment tracks level of education. Only 5 percent of those with college degrees are now unemployed, while more than 20 percent of everyone else is without work. Maybe that's why Washington doesn't get it. The Washington echo chamber is filled with college degrees.
The Big Money economy on Wall Street and in corporate suites doesn't get it, either. They're doing marvelously well because they're tied to rapidly-growing markets in China, India, and Brazil. But the Average Worker economy on Main Street continues to wallow.
The Problem
Let's be clear about this. The problem is lack of sufficient demand for workers. There are only four sources of demand. The biggest source is American consumers, who comprise about 70 percent of economic activity. But the vast American middle and working class can't and won't buy enough to get people back to work. They're still under a huge debt load.
Even if and when they pay it off, their buying days are gone. The Great Recession took away their last means of coping with years of stagnant wages -- going deeper into debt by using their homes as collateral. The housing bubble burst, and home prices continue to drop.
The second source of domestic demand is business. But businesses won't hire more workers without more customers.
(Republican supply-siders say businesses are not hiring because they're uncertain about the effects of the new health care law and don't know how much taxes they'll have to pay. This is political claptrap. Supply-siders also say businesses would start hiring if their taxes were lower. But businesses are sitting on almost a trillion dollars of cash. They don't need lower taxes in order to hire more Americans. They need more American customers.)
The third source of domestic demand is net exports. But they're going nowhere. Although China, India, and Brazil are buying goods and services from American companies -- and thereby boosting US profits -- those US companies are making most of what they sell there in those countries. GM is selling more cars in China than in the US now, and manufacturing them in China.
That leaves the fourth source of domestic demand -- government. But it's not nearly filling the gap. To the contrary, state and local governments are broke, and are cutting spending and raising taxes to the tune of over $110 billion this year. The federal government's much-maligned stimulus is about gone (almost all economists believe it saved over 3 million jobs).
The Fed is pumping $600 billion into the economy, but without an expansive fiscal policy this is only fueling speculation. Instead, austerity and deficit reduction are the new buzz-words in Washington, as well as in Europe -- which is absurd given what's happening to the economy.
Republicans won't even vote to extend unemployment benefits for the record number of Americans -- almost half the unemployed -- who have been out of work for six months or more. Starting today, 800,000 of the long-term unemployed lose their benefits. Unless Congress moves quickly, by the end of December, 2 million more will lose them.
What must be done
Extend unemployment benefits. Not only do unemployment benefits help families who are hurting; they also put money into their pockets that they'll then spend -- and their spending will keep other Americans in jobs.
I was on television yesterday debating a Republican who insisted unemployment benefits deter the jobless from finding work. Another partisan bromide. When, as now, five people are out of work for every job opening -- and when, as now, unemployment benefits in most states are a small fraction of someone's former wage -- it's bizarre to argue that unemployment benefits are causing unemployment.
Create a new WPA and National Infrastructure Bank. Not only do we need extended unemployment benefits. We need a new WPA, modeled after the WPA of the Great Depression, to put jobless Americans to work. We need a national infrastructure bank to rebuild our crumbling highways and water and sewer systems, thereby putting additional people back to work.
Cut payroll taxes and enlarge the EITC. We should exempt the first $20,000 of income from the payroll tax, thereby putting more money into the pockets of lower-wage workers -- which they'll spend. We should extend the Earned Income Tax Credit -- a wage subsidy -- upward through the middle class, and reduce taxes on everyone up to $80,000 of income.
How to pay for this. Not in 70 years has so much of the nation's income been at the very top. Pay for all of this with a 2% surcharge on incomes between $1 million and $2 million, a 3% surcharge on incomes between $2 million and $5 million, and a 5% surcharge on all incomes over $5 million. Add in a .5 percent transaction tax on all financial transactions.
Why Would Republicans and Conservative Dems Ever Agree?
They'll agree to measures like this when they understand that our choice is either such reforms or continued economic stresses for millions of American families -- stresses that will translate into an ever angrier and more divisive politics.
(When I wrote my new book Aftershock, I hoped what I saw unfolding would not become the new reality. It is.)
They'll agree when they see that we can not go back to the old "normal" of an unprecedented concentration of income and wealth at the top, because that old normal got us into the present fix. It undermines the purchasing power of the rest of America. It invites speculation on Wall Street. And it translates into extraordinary political power of a moneyed elite hell-bent on gaining even more power and wealth, and preventing the rest of America from flourishing.
But why would this moneyed elite ever agree? They'll agree when they understand this is a lousing strategy for even for them. Those at the top would do better with a smaller share of a booming economy that elicits a positive politics, than they will do with an ever-larger share of an anemic economy that fuels the politics of anger.
They should convey this message to their bought-for representatives in Congress.
Robert Reich is the author of Aftershock: The Next Economy and America's Future, now in bookstores. This post originally appeared at RobertReich.org.
Current Population Survey (CPS)
Historical Data - Bureau of Labor Statistics Data
Unemployment - Wikipedia, the free encyclopedia
Unemployment rates - Unemployment rates by state from CNNMoney
US Unemployment Epidemic May Be Here to Stay
Rise in Unemployment Rate Leaves Treasurys Mixed
Crude Oil Rises to 25-Month High as US Unemployment Drives Dollar Lower
Let’s replace unemployment payments with a voucher to all citizens that have been unemployed longer than 26 weeks. Small businesses can hire voucher employees at their unemployment rate. In return, Voucher employees will work twenty five hours per week and receive the same pay they would have received through unemployment. The Federal Government then will reimburse employers the employees’ wages.
A few benefits include: Employees learn new skills and can continue to seek full employment. Employers lower risks of hiring new employees, spur innovation, and reduce prices of goods and services to compete in the global market. Without budget increases, Government supports job growth through direct infusion of dollars into small businesses, and lets the free market determine how to maximize resources.
This idea can employ all Americans now, and can move many from the sidelines of our economy onto the field of American ingenuity and global competitiveness. I ask your readers to share with their representatives thoughts about this voucher plan in hopes that a leader might champion its concept now when we need it most.
http://www.wealthvest.com/blog/wade-dokken/4191/
Laws associated with predator pricing, restraint of trade, coulusion, false adverising, trust busting, health and safety for workers, truth in labeling, food processing, drug approval, environment were inacted because the satus quo was hurting consumers (And sometimes small upstart firms who would try to compete but be forced out through unscrupulous activity by industry giants - Microsoft is a recent example of restraint of trade violations and deregulation of the electric markets and banking ten years ago led to instability and horrible outcomes for most americans.
However, you other than that you make a very good case.
Abolish unemployment insurance, Medicaid, and the Fed, go back to the glorious 19th century when large banks controlled the flow of money, monopolies cheated everyone, and wages were so low the slums of NY were only a step above those of today's Calcutta.
It was a fetid existence for most people... life expectancy was low, plagues flitted across the land,  and the gap between rich and poor rivaled that of pre-revolutionary France... But wages were low and the unemployed had to fend for themselves which is just the way the Republicans like it.
"Impossible!" you say. I ask you, WHY do they say this and act like this if they do not intend it?
THE SOLUTION is to tax the über rich and use the money extend unemployment insurance and to build infrastructure paying good wages for good work to good people.
The government does need to do more and starting with extending the unemployment benefits. Are some inspired not to be productive when they get a weekly check? There's always a few, but all of them put that money directly back into the economy because they don't have any other choice and that's the kind of stimulus we need.
The other problem in my view is the government doesn't really know how to stimulate. All these fancy programs such as Cash for Clunkers etc. etc., just don't work. Money needs to get into American's hands in such a way that it actually gets circulated into the economy post-haste! Sounds like a tax cut maybe? Great if the money actually got spent, but it doesn't in this environment of fear that you so correctly describe. For many, the wealthier the more so, it gets saved away.
How about $2000 per to every taxpayer in the form of "spending coupons", 20 at $50 face value? Use them by next July or lose them. Can't deposit them or pay your mortgage with them. Use them to pay for stuff at American retailers only. Or if you're rich, you can donate them to charity. Go to dinner, put it all down on a car, use 'em at the grocery - all fine. $400 billion immediately injected into the economy. That might create some demand and in turn some new jobs.
http://seekingalpha.com/article/239717-is-qe2-the-road-to-zimbabwe-style-hyperinflation-not-likely
Unemployment benefit extensions while Republicans in congress play games.
Health Care Reform issues are debated by States controlled by Republicans.
Social programs, school programs, and welfare programs go unfunded by filibusters by Republicans in the Senate.
Tax Reforms are not debated or passed while Republicans in the Senate filibuster every move.
Needless delays in helping this nation recover from a recession caused in no small part by Repubican's inattention to rules and regulations of the financial markets.
Factories closed, employees laid off, businesses shuttered, and the economy serves only the very wealthy while Republicans spread dogma and false statements and filibuster any progress in the Senate.
Republicans are the enemy of our nation, they are determined that the present President must fail even if it means the country is destroyed.
Thomas Franks', "The Wrecking Crew". A must read for those who labor under the misconception that Republican are patriots.
F&F for the clue. Thanks!
Extend Unemployment - great, higher taxes for companies struggling to survive and less money in the pockets of employees, to pay for people to stay on the government dole even longer.
Health Care - who knows how much this will cost us, apparently no one. Sorry that States are fighting what is essentially a government take over of a large portion of our economy.
Social, school, and welfare programs - Its been proven over the last 70 years that it doesn't work. Once again, let's take from those that have and give to those who don't. Take from those that do and give to those that don't. You cannot socially engineer a society, it has never worked.
Tax Reforms, Rules, Regulations - They are debated and fillibustered by both sides. They are all guilty of inattention.
Two other points: Seven of the top 10 wealthiest members of Congress and 28 of the top 50 are Democracts. So both sides are elitist and rich. A number of States that are in a lot of financial trouble (i.e. - California) are decidely Democratic and very supportive of these entitlement programs, how well did that work in their states.
Finally, be careful of stating that the Republicans are the "enemy" and out to destroy the country. By your statement you are declaring that people that don't believe in what you do are your enemies, do you really want me as
Mike
Is there a guide to show which PAC's and lobbies control which congressmen? Because I certainly don't believe they're going to listen to me or any other voter. They don't need to. They get their votes through organized interests. This would be easier if congressmen wore jumpsuits with sponsor patches like NASCAR drivers.
Thank you for this excellent article, Mr. Reich. You presented some very solid ideas, indeed.
Obama’s economic policies have been disastrous for the economy and thus for the average American. Even many of those now employed are vulnerable and face an uncertain future. And Obama diddles while jobs burn away.
And still the president persists in his folly. It appears almost certain he will trash the rules he himself established for his failed Cat Food Commission and accept piecemeal its recommendations to reduce Social Security benefits and raise the retirement age. He will also sign off on extending tax cuts for the rich or even making them permanent. The extension seems to be what he intended all along, his mealy-mouthed pronouncements to the contrary notwithstanding. To wit the numerous opportunities the Democrats had - and frittered away - to present to Congress an independent bill for a middle class tax cut.
The failure to pursue a jobs program and a tax cut for the middle class will rank high among the many failures of the Obama administration.
You also need to realize that it is not the President who makes the laws, rather he heads the Administrative Branch of government that implements the laws that Congress creates.
The real problem is in Congress. We have to many reps who are bought and paid for by the enemies of the middle class. It's time to flush them out. Do you realize that usually less than 50 percent of eligible voter participate in elections?
Obama and the Democrats gave the cut in small amounts in paychecks in hopes that it would be spent and provide further stimulus. I would venture to say that many people still do not realize they received a cut. And if it provided any stimulus it was too small to make an impact and few benefited from it. Had the cut been given in a lump sum check all would have been aware they received one. This is just another example of the pathetic brand of politics practiced by the Democrats.
Administrations can submit programs to Congress which when passed and signed by the president become law. Perhaps the most noted recent program was Bush's infamous prescription bill.
Of course members of Congress receive campaign contributions – I call it payoff money – to do the bidding of special interests. But you must include the president in the group of officials who receive tainted money.
But the president is the leader of the country and it is to him that the nation looks to for leadership. By capitulating repeatedly to the demands of GOP blackmail, the president abdicates his leadership role.
After 50 years of over reaching environmentalist bad policy chasing every good blue collar skilled worker out of the country you have the gall to say that it is the fault of the taxpayers not wanting to pay a generational welfare system as we had when he and Clinton reformed welfare now he calls it unemployment - a person that can not find a job after two years needs to get new [or some] job skills or accept the fact that their industry has been chased off. Just like we have done to the the deep water driller and the citizens of the south gulf coast.
Where are jobs that pay a living wage going to come from? Not burger King or Sears.
1) Freeze govt. hiring and pay.
2) Close un-needed bases here and abroad.
3) Bring home our soldiers.
4) Stop sending billions of dollars oversees.
I could keep going but I'm running out of words.
Adios,
Dayne
Take Care All,
Dayne
- I have no idea yet how the Health Care Reform will affect us.
- I have no idea about what tax cuts or hikes may be coming (though I just received a state unemployment tax for 2011 that will double our tax liability, oh, there is also an increase on what the employees pay - don't know about the Federal increases, neither does the IRS or companies that supply payroll software for companies. I could go on and on but lets cut to the core. Taxing the super-rich won't solve the problem. We need to bring manufacturing jobs back to this country and drastically cut government spending and get people OFF entitlement programs.
Take Care,
Dayne
Our trade laws need a major overhaul. Don't forget that the R's recently defeated a measure that would have given domestic production a level playing field against foreign produced goods. Why are we paying you to produce off shore when we have so many unemployed Mr. Business Owner?