Friday 25 November 2011
The nation is experiencing the most severe economic crisis since the
Great Depression. Princeton economist and former Vice Chair of the
Federal Reserve, Alan Blinder, calls the current crisis a "national jobs
emergency."
The "official" unemployment rate in September was 9.1 percent - nearly
twice the rate a decade ago - leaving 14 million people out of work.
It's not just the financial meltdown of 2008 and the Great Recession.
The American economy has been underperforming for years. Business Week
calls 1999-2009 "The Lost Decade for Jobs" as private-sector employment
grew by a paltry net 1.1 percent - the lowest increase for any ten-year
period since the 1930s.
The original version of President Obama's increasingly embattled jobs
plan aimed to provide a much-needed extension of unemployment benefits
and a payroll tax cut for working Americans, but outlined only scarce
measures to dent the catastrophic rate of unemployment. What we need
today is a massive jobs program like the Works Progress Administration
(WPA) launched by President Franklin Roosevelt. The WPA put millions of
people back to work in the midst of the Great Depression, restoring
their dignity, putting money in their pockets and quite literally saving
lives.
The crisis is much worse than most of us think. According to the US
Department of Labor, the real unemployment rate is 16.5%, when you
count people whose unemployment benefits have run out and still are not working, part-time workers who want full-time jobs, and discouraged workers
who have simply stopped looking. The Economic Policy Institute (EPI)
reports that the number of long-term unemployed, meaning those
unemployed for more than six months, hovers at a postwar record level of
45 percent. All these figures are much higher for black and Latino
workers.
No one is insulated. Workers at every educational level have seen their
unemployment rates double since 2007 - high school graduates, college
graduates and even those with graduate degrees. The severity of the
crisis has overturned conventional wisdom that higher education is a
cure for joblessness. The unemployed do not need more education - they
need work.
What Did Roosevelt Do That Obama Is Not Doing?
In the winter of 1933, with unemployment reaching 25 percent, Roosevelt
established the Civil Works Administration, an emergency jobs program
that put 4.2 million unemployed to work within six months. He also
started the Civilian Conservation Corps to employ a half-million young
men with minimal skills in useful work in the nation's parks, forests
and rangelands. Meanwhile, Roosevelt launched the Public Works
Administration, which funded long-term infrastructure projects such as
highways, bridges, dams and public buildings.
The WPA followed in 1935, employing 8.5 million more between 1935 and
1943. It put those men and women to work on projects requested by state
and local governments, such as roads, schools, sewers and airports, and
operated local arts, educational and media programs.
Once the New Deal was launched in 1933, the US economy began to grow
again by leaps and bounds - at a rate of nearly 10 percent per year. By
1937, production had doubled and the unemployment rate had dropped by
half. By 1941, before the war began, the economy was back where it would
have been had the Depression never happened. With the wartime build-up,
mass unemployment became a distant memory.
To tackle our current unemployment crisis, the federal government
should spend $500 billion a year over the next three years on emergency
jobs programs like those of the New Deal. The first step would be to
give every state and local government the funds to restore their
budgets. The loss of 680,000 teaching, police, transit, and other
public-sector jobs over the last three years has contributed measurably
to the downturn.
The second step would be direct programs to create new full-time jobs
for the unemployed - at the median wage of $16.27 an hour - in areas
where the need is obvious: in schools (e.g., teachers, school
maintenance and enrichment programs); human services (e.g., child care,
home care and health care); and energy conservation (e.g., retrofitting
homes and public buildings).
To this should be added a third step: financing large-scale public
works programs to build schools, bridges, a "smart" electrical grid,
zero-emission buses, high-speed rail, wind farms and affordable housing.
The pathetic state of our national infrastructure has been decried for
years by the American Society of Civil Engineers, which gives the
country a D grade, and the United States ranks 32nd in the world in
infrastructure, according to McKinsey Global Institute.
A substantial increase of government spending for public works will
create expanded opportunity for youth, women and minority workers to
enter state-certified apprenticeship programs in the construction trades
and to earn a middle-class income.
How to Pay for Such a Jobs Program?
First, the federal government can run temporary deficits. While the
federal deficit is relatively high at 10 percent of gross domestic
product (GDP) in 2010, it is still dramatically lower than the peak of
30 percent of GDP during World War II. Contrary to popular thinking,
government spending in a recession can lower the deficit by taking
people off the unemployment roles and putting money in the hands of
ordinary people to bolster consumer demand, which stimulates business
and returns more tax revenues.
But since we are worried about the current federal deficit and the
budget woes of state and local governments, we must heed investor Warren
Buffett's call to "stop coddling the rich" by raising taxes on
millionaires and closing corporate loopholes.
The upper 1 percent's share of national income increased from 9 percent
in 1976 to 24 percent in 2007, according to a report by UC Berkeley
economist Emmanuel Saez. Nearly half of total income went to the upper
10 percent in 2007, compared to 33 percent 30 years earlier. The top
income tax rate on the highest earners was 70 percent between 1940 and
1980 - when the economy was performing much better than it is today -
and now it is just 35 percent.
Moreover, corporate profits increased at an annual rate of $1.6
trillion in 2010 - a record for the postwar period. The Tax Policy
Center reports that federal revenue from corporate taxes has dropped by
half over the last 60 years, while corporations like Verizon, Bank of
America and General Electric pay essentially no taxes due to loopholes
in the tax code.
The Congressional Budget Office estimates that a 5.6 percent surcharge
on incomes exceeding $1 million, as proposed by the Obama
administration, will raise $40 billion a year. Ending the Bush-era tax
cuts for the upper 2 percent, set to expire in 2012, will generate more
than $80 billion a year, according to the Economic Policy Institute.
Economists Robert Pollin and Dean Baker estimate that a 0.5 percent
transaction tax on the transfer of stocks and securities will yield $175
billion annually from the largest financial institutions and
speculators. The Center for Tax Justice calculates that federal tax
revenue will increase by $365 billion a year if corporate tax loopholes
and subsidies are eliminated.
Republicans oppose taxing the rich, just as they did in the 1930s. It
will take popular mobilization by labor, faith, civil rights, women's
and youth organizations to overcome such resistance - just as it did
then. Occupy Wall Street may be the beginning of a movement for a new
New Deal. Collective action worked in the 1930s and it could work again
now.
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