We now live in parallel universes.
One universe is the one in which most Americans live. In it, almost 15 million people are unemployed, wages are declining (adjusted for inflation), and home values are still falling. The unsurprising result is consumers aren't buying -- which is causing employers to slow down their hiring and in many cases lay off more of their workers. In this universe, we're locked in a vicious economic cycle that's getting worse.
The other universe is the one in which Washington politicians live. They are now engaged in a bitter partisan battle over how, and by how much, to reduce the federal budget deficit in order to buy enough votes to lift the debt ceiling.
The two universes have nothing whatever to do with one another -- except for one thing. If consumers can't and won't buy, and employers won't hire without customers, the spender of last resort must be government. We've understood this since government spending on World War II catapulted America out of the Great Depression -- reversing the most vicious of vicious cycles. We've understood it in every economic downturn since then.
Until now.
The only way out of the vicious economic cycle is for government to adopt an expansionary fiscal policy -- spending more in the short term in order to make up for the shortfall in consumer demand. This would create jobs, which will put money in peoples' pockets, which they'd then spend, thereby persuading employers to do more hiring. The consequential job growth will also help reduce the long-term ratio of debt to GDP. It's a win-win.
This is not rocket science. And it's not difficult for government to do this -- through a new WPA or Civilian Conservation Corps, an infrastructure bank, tax incentives for employers to hire, a two-year payroll tax holiday on the first $20K of income, and partial unemployment benefits for those who have lost part-time jobs.
Yet the parallel universe called Washington is moving in exactly the opposite direction. Republicans are proposing to cut the budget deficit this year and next, which will result in more job losses. And Democrats, from the president on down, seem unable or unwilling to present a bold jobs plan to reverse the vicious cycle of unemployment. Instead, they're busily playing "I can cut the deficit more than you" -- trying to hold their Democratic base by calling for $1 of tax increases (mostly on the wealthy) for every $3 of spending cuts.
All of this is making the vicious economic cycle worse -- and creating a vicious political cycle to accompany it.
As more and more Americans lose faith that their government can do anything to bring back jobs and wages, they are becoming more susceptible to the Republican's oft-repeated lie that the problem is government -- that if we shrink government, jobs will return, wages will rise, and it will be morning in America again. And as Democrats, from the president on down, refuse to talk about jobs and wages, but instead play the deficit-reduction game, they give even more legitimacy to this lie and more momentum to this vicious political cycle.
The parallel universes are about to crash, and average Americans will be all the worse for it.
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
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Say, isn't the Chairman of that company also the chairman of the Presidents Commission on Jobs and Competitiveness? Jeff is going to have some 'splainin to do next time he meets with the POTUS. Or maybe not.
I don't see Caterpillar picking up stakes and setting up their manufacturing in China. Where's Obama's NLRB making a squawk. A company like Boeing can't relocate within the United States to save US jobs without getting sued by the feds. Yet Obama's cozied up with GE not only in this fiasco but they are in bed on that carbon credit exchange that fell apart. GE was going to be the banker on that whole scam.
Thomas Edison's greatest invention is now considered evil by our EPA. What's it coming to in this socialist worker's paradise?
What keeps the created jobs from being offshored too ?
Any job that can be done at a desk or computer is vulnerable to being offshored, except senior management.
What the U.S. is experiencing is global labor arbitrage.
Really? Well the US government has expanded fiscal policy by $4 trillion over the last 3 years. How is the economy doing after all that government spending? Not good? Oh, well lets spend more! In fact, why have a debt ceiling at all? Lets just get rid of the debt ceiling so that there is no limit on the amount of debt the goverment can accumulate? If government spending was really so good for the economy, things would have recovered by now. Instead, every week the economic data gets worse.
Perhaps the government should be spending less time listening to people like Reich who think that the solution to a crisis caused by low interest rates is by lowering interest rates further or that a "debt crisis" is caused when you fail to take on more debt. Maybe they should start listening to actual business people who create jobs like Steve Wynn who complain that it's easier for them to do business in China than America because US government policy has a been a "wet blanket" on the US business environment.
My perspective on Obama has been different from most progressives' in that I have never seen him as a weak, caving negotiator. I have always seen him as a neoliberal Democrat, following traditional ideology, and using the GOP as a shield against progressive Dems. What is confusing me, is that, even neoliberal economics requires some amount of stimulus spending to jump start a stalled economy. It looks to me that he doesn't provide for any working capital in his grand bargain, which is going to severely limit his options next term.
http://www.boston.com/business/articles/2011/07/26/ge_moving_x_ray_business_to_china/
:-)
Even if you're a conservative, and you hate the "Democrat (sic) Party" and especially the black man in the White House, why would you believe that you can "cut your way to prosperity"?
How will throwing more people out of work help our current economy? How will we create more demand for business goods and services if there are less people working and much less disposable income?
Why would anyone think this is good?
The economy is very, very slow right now. And there is an extremely high level of unemployment. And businesses are concerned with how little demand there is for what they're selling.
When businesses are "stuck in a ditch", they go get more capital, borrow more money, in order to get them out of the ditch, and up and running again. They then pay back that money over time, and it allows them to survive and even improve.
Our government obviously needs to do the same thing; right now. People are literally starting to SCREAM for jobs! We need to create demand as soon as possible and the public sector is the only way to do it.
But, if you hate and despise our government, and start with the irrational, almost religious view, that government is "always wrong", and "never does anything right" and "wastes all of our tax dollars" etc, and other nonsense, then we're going to be stuck in that ditch for a very, very, very long time...
wow... a good and perceptive question! To understand the reasoning, one must peel the onion back to the next level of understanding. First, we need to clean up the question.... its not about 'cutting' in general as obviously they don't want businesses to 'cut', right? So it only applies to government spending. So, what is the difference between government spending and private sector spending? Where do each get their funding? How is the spending determined?
Ever hear of "Macroeconomics", Einstein? Ever hear of an closely interconnected economy, with strong relationships between what you obtusely refer to as "the government" and private businesses? Ever consider that many, many businesses are connected to the income and outflow of "the government" and that they can impact each other?
Nah, I didn't think you had.
But, to address your last few questions: Virtually every business of any substantial size receives a significant portion of its revenue either directly, or indirectly from "the government". And, there are some companies---like large military contractors---who have but one customer: "the government". (Ever take a ride around Northern Virginia? You might learn something.)
And, "the government", as you refer to it, in the past, has often initiated things that no individual business could have, or would have done on its own. And the technological developments that came out of those "government programs" had an immensely positive effect on private businesses. (Ever hear of the Space Program or the Internet?)
But, if you're a Government Hater, and you've obediently swallowed what you've been spoon fed by such credible sources as Rush Limbaugh and Fox "News", then you'll continue to believe what you want, regardless of the facts.
Sorry for you.
Wake up, "leopardpm". The 19th Century is over.
Sorry, professor, but public works is not a new idea. It is a very, very old idea and it still serves the same purposes; feed the people and keep them from getting dangerously restless. Todays wealthy could learn an imporant lesson, a lesson that Pharaoh Khufu knew full well 4500 years ago.
Another era where "public works projects" were big was the enormous palace building projects all over Europe after the 100 years war had deimated Europe. These huge buildings employed thousands, unskilled as well as highly skilled workers, some still tied feudaly to their lords, some as independent master and journeyman artisans who traveled around from project to project.
There is a place for government to be the gorilla in the room, to be the unifying force as well as the economic mover in our nation and pull us out of the crisis we are in - the JOBLESS crisis!
Our trade policy which enables multi- national corporations to abdicate their social responsibility here at home and abroad is the real issue.
Our nation does not allow these companies to engage in the exploitation of workers in this country, why do we allow them to continue to sell their products in the American marketplace while engaging in slave labor practices overseas.
This is the GREAT MORAL AND ECONOMIC QUESTION OF OUR TIME. We must ask ourselves if we allow this because it is happening to little yellow skinned people far away with names we cant pronounce,rather than American workers? If so ,have we become the biggest hypocrits in the world?
Do we not believe in basic human rights and dignity for all people any longer?
Until we change our trade policy in ways that would prevent those goods manufactured with slave labor from entering the American marketplace there will be NO JOB CREATION OF ANY CONSEQUENCE in this nation.
Standing up for these foreign workers is the best way to stand up for American workers.
absolutely correct... but then you continued...
"Our trade policy which enables multi- national corporatioÂns to abdicate their social responsibiÂlity here at home and abroad is the real issue."
Any 'social responsibility' any business endeavor has is: do not violate the rights of other humans (through assault, fraud, theft), AND, provide goods and services to customers which are valued enough to justify the price.
As far as the moralizing over countries and events occurring there, I say it is more important to moralize locally and through natural market processes and by being an example, let the effects of 'good' morals be shown to others so that they can freely choose to overthrow their respective immoral political regimes.
"Standing up for these foreign workers is the best way to stand up for American workers. "
sorry. it simply is not. American workers are ALSO American consumers and subsidizing a select few workers at the expense of all consumers is NOT moral, especially is it necessitates the use of coercive force through governmental policy/action. Morals cannot be distributed at the point of a gun.