Voters live in the midst of a devastating social calamity: More than 20 million people in need of full-time work, wages falling, insecurity rising, poverty at record levels. The few jobs being created pay less than those that were lost. Suicides are rising. Stunningly, even the life expectancy of lower-educated white men and women is falling.
The chattering classes, largely oblivious to the scope and depths of the misery, are focused instead on the so-called “fiscal cliff,” the automatic spending cuts and tax expirations scheduled to kick in after the elections, unless a lame duck session of Congress acts. Their conversation centers on the terms of austerity. Will Republicans let top end Bush tax cuts expire? Will there be a grand bargain with Medicare and Social Security on the table? The presidential candidates are pressed on their plans to balance the budget, not on their plans to get the economy going.
This has left Ben Bernanke, the conservative Republican who heads the Federal Reserve, virtually alone in issuing ever more pressing alarms.
“The weak job market should concern every American. High unemployment imposes hardship on millions of people and it entails a tremendous waste of human skills and talents,” he said earlier this month. “Five million Americans have been unemployed for more than six months, and millions more have left the labor force, many of them doubtless because they’ve given up on finding suitable work.”
The Federal Reserve has adopted extraordinary measures – committing itself to sustaining low interest rates until the recovery is well in place. It is now considering a “jobs trigger” – announcing that it would continue to act aggressively until unemployment level comes down to 5.5 percent.
But there are limits to monetary policy. Interest rates are already low; companies aren’t hiring because they don’t see demand for their products. They lack customers more than they lack credit.
The Fiscal Jobs Trigger
The presidential candidates and Congress should be pressed to adopt a budget version of the “jobs trigger.” Putting people back to work is the first step to getting our books in order. So Congress should pass a fiscal trigger as part of any grand bargain: Comprehensive deficit reduction measures will kick in only when the economy is moving, and unemployment comes down to 5 percent or so.
Great Britain, Ireland and much of the European community have demonstrated the harsh costs of inflicting austerity prematurely on weak economies. The result is economic decline, rising unemployment, spreading misery and a worse fiscal mess, as revenues plummet and the costs of the unemployed rise.
In fact, most every plan for austerity assumes economic recovery. Republican vice presidential nominee Paul Ryan scorned the president for not embracing the recommendations of the co-chairs of the Simpson-Bowles deficit-reduction commission (neglecting to mention that his vote against the recommendations helped block their adoption by the commission). At the Democratic National Convention, both Bill Clinton and the president suggested that deficit reduction would follow the principles of the Simpson-Bowles recommendations.
Many of these recommendations are truly wrong-headed, but Simpson and Bowles got one thing right: they argued that long-term deficit reduction should be implemented only after the economy recovered.
“Don’t disrupt the fragile economic recovery. We need a comprehensive plan now to reduce the debt over the long term. But budget cuts should start gradually so they don’t interfere with the ongoing economic recovery. Growth is essential to restoring fiscal strength and balance.”
Good Jobs First
Jobs first. The reason even Alan Simpson and Erskine Bowles agree is simple – but seems to have been lost in the current debate: Putting people back to work is the first and necessary step to deficit reduction. As people go from collecting unemployment and food stamps to working and paying taxes, spending goes down and revenues go up. All of the deficit reduction plans ASSUME a growing economy with reduced unemployment. None of them works without it.
What is needed now is action on jobs. Passage of the president’s American Jobs Act would be a good start. The U.S. should be taking advantage of record low interest rates and an idle construction industry to finance a major, long-term program to rebuild America’s decrepit infrastructure. The automatic spending cuts scheduled to kick in at the end of the year – the sequester – should be repealed; it’s a ridiculous way to address a budget. With the wealthy already capturing virtually all of the rewards of growth, the top end Bush tax cuts should be allowed to expire with the money used to keep teachers and cops on the job, to hire veterans and the young directly in nonprofits, and urban and green corps. The payroll tax cut should be extended, for it is one of the most effective ways to put money into the pockets of people who will spend it. With 40 percent of the unemployed suffering long-term unemployment, it is simply cruel to repeal extended unemployment insurance.
At the same time, Congress could lay out a long-term plan for getting our books in order. In a rational world, this would address the elements that destabilized our economy: Wall Street excesses, unsustainable trade deficits, and Gilded Age inequality. It would protect the basic pillars of family security – Medicare, Medicaid, Social Security and programs for the vulnerable. It would focus on the central source of projected rising deficits: our broken health care system. And it would prescribe “sacrifices” from those who have cleaned up over the past years – the rich who have captured ever increasing portions of the national income and wealth; the military, which is running budgets higher in comparable dollars than their Cold War heights; the entrenched lobbies – Big Oil, Big Pharma, Big Agra – that pocket billions in obscene subsidies and tax breaks.
Progressives need to join the conservative Republican chair of the Federal Reserve in demanding that Washington wake up. Good Jobs First. Economic recovery before austerity. A trigger of 5 percent unemployment before a long-term austerity agenda kicks in.
And in the coming presidential debates, the moderators would be well advised to get out of the Beltway and take a look at conditions in this country. If they do, they will press the candidates to answer the question on voters’ minds: How will you get the economy going and people back to work? Do you support a good-jobs-first agenda before turning to tightening our belts? If you advocate turning to deficit reduction now, aren’t you condemning Americans to continued mass unemployment and declining wages?
In a startling measure of how upside down the Washington debate has gotten, Democratic House leader Nancy Pelosi said last week that she hoped the payroll tax cut would be allowed to expire. Its whole point was to ensure economic stability, she said as reported by The Huffington Post. Now that things have stabilized, it’s time to get moving to bigger changes.
Pelosi is a strong, progressive leader, and was one of the great House speakers in history, but she gets it exactly wrong. As Bernanke warns, things aren’t stabilizing. Europe is descending into recession; China is slowing. The slow U.S. recovery is faltering, running on fumes. We need global action to get the economy going. And at home we need good jobs first.
Thursday, September 27, 2012
Putting jobs first
Robert Borosage @ Campaign for America's Future: