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Terrance Heath Headshot

The Jobs Deficit & The Breaking Point, Pt. 2

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The deficit fear mongers are right: America is facing a deficit that threatens to cripple our economy and foreclose on the futures of millions of Americans. They just have the wrong deficit. That's the reality we'll address at America's Future Now!: America faces two deficits, and must decide which is most important to address now. Prioritizing one will enable us to address the other in the long term. Prioritizing the other will eliminate hope of addressing the first one at all.

In other words, we face a choice between a better future for all Americans, and oblivion. Right now, our political leaders are choosing  oblivion. Here's how we're going to pay for it.

In the same day that the Senate approved nearly $60 billion in additional funding for the war in Afghanistan, the House cut $24 billion in aid to states and voted to allow COBRA extensions for the unemployed to expire.

Laid off workers would lose subsidies to help buy health insurance and states would be denied billions in federal aid under a plan by House leaders Thursday to trim a bill extending jobless benefits.

Democrats struggled to extend jobless benefits for people who have been out of work for long stretches as lawmakers worried about the growing budget deficit balked at the price tag of the package.

The cuts would reduce the package by about $31 billion, to about $112 billion. Business tax increases would pay for some of the bill, which would still add more than $50 billion to the deficit.

...Democratic leaders have also proposed eliminating $24 billion in aid to cash-strapped states to help cover Medicaid expenses, Cuellar said. Congress increased the federal government's share of the federal-state insurance program for the poor last year.

Thousands of people who are already set to lose unemployment benefits when an extension expires next week will also lose COBRA benefits, because Congress cannot justify the cost of helping Americans who are in need. But we can come up with another $60 billion for the war in Afghanistan, without so much as a mention of  how we're going to "pay for it."

Here's how we're going to pay for it. Unemployed and poor Americans are being cut loose. Any of us who fall into one or both of those categories can expect our fates to be consigned to the same oblivion.

Democrats also abandoned a larger version of the war funding bill that included funds to prevent the layoffs of 300,000 teachers.

Also in the House, Appropriations Committee Chairman David Obey, D-Wis., called off a vote on a far larger version of the war funding bill that added the $23 billion to help school districts avoid teacher layoffs, along with $6 billion to make up for a funding shortfall in grants for low-income college students. An Obey spokesman blamed the busy floor schedule and ongoing uncertainty over the jobless benefits bill. Appropriations panel Republicans had vowed to offer a raft of politically painful amendments.

Here's how we're going to pay for it. Our children, and our young people are being cut loose. 

The deficit hawks won this round. And to give you an idea of how much ground was ceded to them, they won without having to answer a question that no one in the Democratic caucus or the White House forced them to answer. 

Yet the deficit hawks' rejoinder is essentially: So what? Government spending is out of control. We need to cut back now.

The problem with this ostensible solution is twofold. First, it conflates short-term deficits needed to stanch the recession with long-term issues of fiscal sustainability. Such thinking risks turning a short-term recession into long-term stagnation, much as Japan did in the 1990s by failing to stimulate its economy sufficiently. Second, it calculates the dollar cost of the stimulus but neglects to factor in the dollar benefit from, for instance, keeping hundreds of thousands of teachers, police and firefighters on the job and paying taxes rather than collecting unemployment insurance. Once such particulars are accounted for, a new study from the liberal Economic Policy Institute argues, the cost of the jobs created in the bill coming before the House this week is more than halved, from $75 billion to $35 billion.

Those who oppose the jobs bills in the House and Senate this week should be compelled to answer some questions, starting with: Absent more stimulus, what do they see as the plausible engine of economic recovery? What effect will laying off as many as 300,000 teachers have on the education of American children? And, more elementally, don't they know there's a recession on?

They won the argument by continuing to answer, "So what?" And congressional Democrats apparently accepted that answer, and accepted it without forcing the deficit hawks to answer another important question: Who will be hurt by deficit reductions?

The progressive message on the deficit has to be very clear: first, don't do anything that will endanger our economic recovery, because the best way to solve the deficit is to improve our economic health (see: the 1990s). Secondly, when you ask for sacrifices, they shouldn't be all or mostly from the middle class and poor. This is a pretty key point, since many of the deficit hawks seem to be zeroing in on cuts in Social Security and a Value Added Tax, both of which overwhelmingly impact the poor and middle class far more than they do the wealthy.

What these proposals are is an attempt to make middle and lower income people pay for the sins of the wealthy who have benefited from the deficit. Middle class incomes have been stagnant over the last decade, while the costs of their groceries, gas, utilities, and college education for their kids has skyrocketed. Middle class housing prices have plummeted the last three years, with foreclosures and bankruptcies increasing exponentially. Middle class folks haven't gotten the big tax cuts the wealthy have over the last 10 years, and when taxes are raised at the local level, its almost always regressive taxes like the sales tax that impact poor and middle class people the most. Meanwhile, public school teachers, social services for the poor, parks, libraries, community colleges, programs to help handicapped kids - all of those programs that matter to working families are the things that get cut.

That's how we — middle and working class Americans — are going to "pay for it." 

The austerity demanded by deficit hawks will lead to little more than the complete divorce of job creation from economic growth, and even the permanent downsizing of the economy. The real economy, that is.

What deficit hawks won't say to Americans in so many words is this: Millions of you will be forced to accept a lower standard of living, not just for yourselves, but your children, grand children, and beyond. 

If you want to know how low, go to your closet, your pantry or simply look at your electronics. Check the labels and note the countries where they're made. Then look up the standard of living for workers in those countries. Look of the rate of economic inequality. Quite simply, that's where we're heading without a change of course

If, in your closet or cupboard, you find something made or manufactured in Indonesia, It might interest you that for some conservatives the ultimate goal is to make the U.S. more like Indonesia.

AMY GOODMAN: What should we understand right now, Michael Parenti?

MICHAEL PARENTI: Well, we should understand that the problem we're facing is one which has to do with equity and fairness, that when the foundation gets consumed, the apex gets bloated, it's going to collapse. And that’s just what’s happened. We had eight years of a president telling us that the economy was doing very well, and for his guys, it was doing very well. But in those eight years, wages remained flat or actually declined. And what we had here is so much money and nowhere to put it anymore. But that's because there were no people below able to consume and buy the things they were supposed to buy. The assumption was that the housing market would just continue to go up and up and up, so you can do all these finaglings, but there weren’t enough people to buy these new houses. You had, in 2006, five people doing the work. By 2007, four workers were doing the work that it took five to do in 2006. That was a 20 percent increase in productivity, but there wasn’t any 20 percent or ten or five or three percent increase in income to those workers. People are just working harder and harder for less and less.

And the goal really — the goal is really to bring America to a closer resemblance to Indonesia. The goal is to avoid Denmark and get Indonesia. I mean, they say things like that. In 1978, a number of these financiers came out and said, "This country is just heading for a social democracy, and we don't want that." I mean, they used the term "social democracy." They're aware of these things. A few months ago in The New Yorker, there was an article about how Republicans had a loss for issues, and one of them said, "Well, the reason we're at a loss is because we've accomplished all we wanted to. We've destroyed the social democracy." And that's their goal.

In The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein writes about how Indonesia among other countries were introduced to globalization via a free-market fundamentalist makeover — called "the Asian Miracle" — by the IMF, which demanded that in order to receive much needed loans countries make deep budget cuts, leading to mass layoffs and the absence of services at a time when citizens were reeling from the shock of their sudden introduction to poverty and hunger. In Indonesia, workers who could afford to buy fish and rice were reduced almost overnight to surviving on rice alone. Basic services — formerly public enterprises — were privatized, and prices quickly rose above the what the newly jobless and poverty stricken could afford. In some countries, laws against massive layoffs were repealed so that foreign corporations about to take over the privatized industries could slash overhead as much as they wanted. In others, minimum wage requirements were repealed, making it more difficult for those who did have jobs to sustain themselves.

Sound familiar yet?

It will.

Joblessness is not an individual phenomenon, no matter how it is experienced. The currently unemployed, if they remain so long enough, will accept lower wages and fewer benefits than they had before, as a mater of survival. Young people will then be forced to settle for even less, if they can find work at all. Education will become pointless for many, as well as so far out of reach as to be a dream. Those compromises will be passed on to generations after them, and the consequences will be far reaching for them and their families.

For many, the downsizing of hopes, opportunity, and the end of economic mobility will be permanent, as will the stratification that results.

The deficit cutters are not "starving the beast." They are starving the people government is supposed to serve, weakening them to the point that they cannot demand changes from it.

It makes one wonder what our elected officials are waiting for before they finally act to relieve Americans' economic pain.

The multiple "shocks," as Klien calls them, serve a purpose.

And if you listen to them now, I mean, it's fascinating and outrageous. They're talking about doing nothing, just putting a cap on all spending, that the market is in a stage of correction. They use terms like "correction" or "adjustment." They don’t mind recessions. Recessions are fine. It allows them to buy up smaller companies at bargain prices. It disciplines labor. It humiliates and beats back people. And this, I think, is what we're facing. And I'm infuriated by the Republicans in the Congress and the way they're going at this. The only passion they show is to protect the tax cuts for the super rich. That seems to be the only interest they have.

What's being all but destroyed, is the social contract and the concept of a common good. It's among those contracts that the crisis has made rewritable It's also that which Josh Marshall describes as a set of "social bargains that explain why it is that the overwhelming number of people are content with the fact that some people make $45,000 a year and other people make $45,000,000 a year." But that's not all that's being destroyed. What was left of that contract after being whittled away for the last few decades, was worn way even further by privations (mentioned above) endured by citizens who have watched hundreds of billions of dollars being handed over, with few if any strings attached, to the very corporate entities who helped cause the current crisis and profited handsomely in the process.

All that's needed is a little more time, and that's what conservatives in Congress and the media are doing: running out the clock, and betting that if nothing is done to relieve Americans' current economic pain, the effect of all the previous shocks — whether delivered by chance or design — will set in, and with it resignation.

Doing nothing means sitting and watching the ripple effects of joblessness spread in our communities, and across the country. Simply put, the more people there are out of work, the more people will be out of work, as demand plummets even further, especially if unemployment benefits run out.

But that is what this Congress has chosen.; Yet Congress said no to benefits that would come cheaper than the extension of the war in Afghanistan that we're still not "paying for."

By the end of the year, 5 million people will have their benefits cut off, at great cost to them and to the economy.

The COBRA tax credits, which allow jobless workers to continue their health insurance at only 35% of the normal cost, will also expire next week if the program is not renewed.

In addition to sustaining some of the neediest families, safety-net spending in the form of unemployment insurance and health insurance subsidies helps the economy as a whole by circulating cash into local communities and helping businesses avert further job cuts. Each $1 billion of unemployment compensation generates an estimated $1.63 billion to $2.15 billion of additional gross domestic product (GDP). If the unemployed did not receive insurance benefits, then their reduced consumption would be a serious drag on the economy, reducing demand for businesses’ goods and services, in turn  leading businesses to reduce investments and lay off additional workers. Simply put, allowing unemployment benefits to expire would set off another round of disastrous payroll losses and imperil the entire recovery.

We estimate that these benefit extensions will increase nationwide employment by about 460,000 jobs.  The $55 billion of additional income for jobless workers will be spent on goods and services in their local economies, generating an additional 0.65% of GDP.

If people in America's hometowns don't have jobs, small businesses, don't expand or or even start up. On top of the jobs lost is a layer of jobs not created. On top of that is a layer of opportunity lost due to services cut because cities and states don't have enough working people to fund them. On top of that is the lost opportunity to invest in the education and health of our children.

If we follow this rate, we won't have to worry about building a new economy. We won't have anyone capable of building it and sustaining it. Nor will we have to worry about returning to the old economy, because we will be headed for something far worse.

What we -- Americans and our elected officials -- need to understand is that there is a point of no return. Americans have translated Manifest Destiny into a mythology that has us on an ever upward climb, when at the top of the stairs is nothing but a steep drop. If we don't change course, we won't be able to build from even from there.

The only way to go, then, is down.

That's how we are going to "pay for it." And that's how our children, and their children, are going to "pay for it."

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