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The Real Deficit Crisis: Jobs

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Lots of high-powered attention has been paid in recent weeks to the nation's long term deficit woes. President Obama convened a bi-partisan commission to make recommendations for addressing the budget gap expected in 2015 and the even bigger gap thereafter. Federal Reserve Chairman Bernanke and various past and present directors of the Congressional Budget Office testified that bold steps need to be taken to tackle a deficit crisis that awaits the nation down the road. Their arguments were repeated at a second high-profile forum that featured former President Clinton, his Treasury Secretary, Robert Rubin, and his director of the Office of Management and Budget, Alice Rivlin, among others.

Strangely, few of these participants have had anything to say about the actual deficit crisis immediately at hand - the jobs deficit. They are so worried about the storm on the horizon that they've ignored the hailstorm crashing around them right now. The nation's economy has lost 8 million jobs. Fifteen million people are officially unemployed while another 11 million are involuntarily working part-time or have dropped out of the labor force. Millions of individuals have been without a job for more than a year. And there is no end in sight. Payroll jobs increased for a third straight month in April, but the unemployment rate increased to 9.9% because the labor force grew faster than employment.

Sadly, President Obama, who regularly declares that the unemployment rate is unacceptably high, seems to have decided that there is nothing that can be done, given the soaring budget deficit. Rep. George Miller of California, the chairman of the House Committee on Education and Labor, has introduced legislation to create or save nearly a million jobs, and has gathered 155 congressional co-sponsors and the support of 300 organizations, including the US Conference of Mayors and the National League of Cities, yet neither Obama nor any of his advisors have said anything to support Miller's effort.

Some people speculate that Rahm Emmanuel opposes Miller's bill, the Local Jobs for America Act, because most of the jobs it would create are in local government, rather than the sacred private sector. Others see Treasury Secretary Geithner and NEC director Summers as the problem, too focused on the budget deficit to care about job creation in any sector. There's solid evidence that Geithner, at least, is in fact the problem.

Senate Democrats are struggling to put together a $200 billion package of tax extenders, extenders for the Recovery Act's expansion of Medicaid assistance to the states, unemployment insurance, COBRA subsidies and food stamps, and emergency funding for the 275,000 education jobs that could be lost in the coming school year. Geithner has proposed a $90 billion tax on the liabilities of the largest banks - a sensible way to rein in leverage and raise revenue at the same time. But he has told the Senators he doesn't want the bank tax used to offset new spending for jobs; he wants it devoted to deficit reduction!

It's one thing for Republicans to take that position; they would just as soon see the economy stall before the November elections. But the Obama cabinet should be doing everything possible to create more jobs, both for economic reasons and for their party's survival. The biggest current contributors to the budget deficit are the recession and the unemployment it is still causing. Getting people back to work in paying jobs would increase consumer demand and help the virtuous cycle of spending and business investment we need - and the Democrats need - to ensure a robust recovery and begin reducing the deficit.

Twenty-seven million Americans are unemployed or underemployed. That crisis, not our long-term budget deficit, should be driving fiscal policy. If Democrats in Congress don't have sense enough to deal with the crisis at hand they won't be around to deal with the crisis on the horizon.

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