Wayne O’Leary

Jobs, Jobs, Jobs

Jobs, the conventional wisdom has it, will be key to the success of the Obama presidency and the survival of the Democratic Congress. In this case, the conventional wisdom is probably correct. An Economist poll taken in late January indicated that unemployment ranked first among concerns of the American public — well ahead of deficit reduction, terrorism, the Iraq war, or health-care reform — and that a 60% majority felt the president had done far too little to address the issue.

A few political kidney punches from the voters of Massachusetts have painfully raised the administration’s awareness and that of its congressional allies. The jobs shortage, which Democrats thought they had dealt with when they passed last year’s stimulus package, has shown itself to be the problem that won’t go away. Private-sector employers stubbornly refuse to hire, waiting to be bailed out by consumer spending (70% of the nation’s economic activity), but consumers are tapped out. Meanwhile, official unemployment has not dropped to 8% as promised and predicted, but is instead hovering near 10%, with the unofficial rate, including the underemployed, closer to 17% — nearly one in six workers.

The original stimulus (the American Recovery and Reinvestment Act) spent, or will spend, $787 billion, much of it for eminently worthwhile purposes, but from an immediate jobs perspective, the bulk of the spending has been wholly ineffective. For instance, the roughly one-third foolishly designated for tax cuts was a $288 billion, jobs-neutral addition to the national deficit, while the one-third transferred to the states to provide fiscal aid and expand unemployment benefits temporarily saved many existing jobs from the chopping block, but created relatively few new ones. Only the one-third designated for obvious sources of new employment, such as infrastructure, energy, and communications projects, has had an impact, and the jobs created are overwhelmingly blue-collar in nature, problematic in a largely service economy.

According to the most optimistic estimates of the Obama administration, the 2009 stimulus was to have produced 3.5 million jobs; various other experts projected employment gains of closer to 2.5 million. Even if expectations are met, that’s clearly insufficient. Since the start of the Great Recession two years ago, 8.4 million jobs have disappeared; another estimated 2.6 million needed to accommodate interim population growth have failed to materialize, leaving a shortfall of 11 million jobs. And that doesn’t take into account discouraged job seekers, involuntary temps or part-timers, and those already jobless at the start of the downturn; were they added to the mix, says a year-end Federal Reserve study, the shortage of needed full-time positions would swell to 27 million.

The inconvenient truth is that the administration, betraying little sense of urgency and a remarkable lack of political acumen, deliberately engineered a slow-motion jobs program not scheduled to entirely kick in for several years. Here’s White House economic guru Lawrence Summers, quoted last November in the Washington Post: “We always recognized that America’s problems were not created in a week or a month or a year and that they were not going to be solved quickly .... We designed the Recovery Act to ramp up over time, through 2010, and to make sure that the investments we made were important for the country’s future.” Spoken like a guy with job security and no financial worries.

What earlier administrations facing economic crises understood was that stimulus programs had two purposes: they had to address long-term structural dislocations to be sure, but — and this was recognized as equally important — they also had to provide immediate help to capitalism’s victims, help that was visible enough to furnish the providers with some political benefit as a side effect. The initial Obama stimulus may well achieve the first of these objectives (the evidence is not yet in), but it has fallen flat on the second.

Contrast the Obama team’s deliberate, unhurried response to the current recession with the Roosevelt administration’s prompt, vigorous reaction to the Great Depression. Within eight months of taking office in March 1933, FDR had spurred the New Deal Congress to create the Civilian Conservation Corps (CCC), the Public Works Administration (PWA), and the Civil Works Administration (CWA), and before the year was out over 4 million previously unemployed Americans were already at work on a broad range of labor-intensive public-works projects.

Activist critics of the Obama administration’s overly cautious approach — Christina Romer, head of the president’s Council of Economic Advisors, approvingly calls it “a posture of watchful waiting” — are demanding a more Rooseveltian effort incorporating Works Progress Administration-style government jobs. The Economic Policy Institute has developed a model proposal calling for $40 billion a year over three years to federally hire 1 million of the unemployed for community public works. Tennessee’s Democratic Governor Phil Bredesen selectively implemented just such a plan last summer, using his state’s stimulus allotment to directly create productive work in one critical high-unemployment area; he reduced local joblessness by nearly a fifth.

A job-saving alternative is the one being pursued by European nations, particularly Germany, which is to have government subsidize workers’ private-sector employment. Germany’s so-called Kurzarbeit scheme uses unemployment-insurance funds to offset shortened working hours, thereby avoiding full layoffs. A total of 22 member countries of the OECD (Organization for Economic Cooperation and Development) have introduced some version of the full-pay shortened work week; the Germans use it to keep their recessionary unemployment around 8%, far below the US rate.

Neither public jobs nor subsidized shorter hours have so far gained policy traction in Washington. Instead, the skimpy, inadequate stimulus supplements working their way through Congress are heavy on tax cuts and not much else. The administration itself is mainly pushing the ultimately defeatist orthodox strategy of a business tax credit for hiring combined with an extension of jobless benefits, while accepting (through spokesperson Romer) that unemployment will remain at 10% through 2010 and drop only to 9% in 2011. The White House, it appears, is ready to live with those results.

That’s woefully short of the needed response. Imagination and daring are what’s lacking. Suppose, for example, the $200 billion remaining in the TARP fund were put to good use by creating or preserving jobs rather than saved for future bank bailouts. FDR would doubtless approve.

Wayne O’Leary is a writer in Orono, Maine.

From The Progressive Populist, April 15, 2010