We need a “Put Americans Back to Work Act”
I know it’s doesn’t make for the best acronym, but the problem with the first stimulus was that it was badly framed and named. While I agree with everything that is said in this article, my problem is with the title, Why We Need a Second Stimulus, and one of the hardest things to sell heading into this election cycle would be a “second stimulus”. But making it ALL about jobs and putting Americans back to work is a much better message. Not to mention the fact that Democrats could make it their mantra heading into the election that Republicans are against putting Americans back to work. Here are some excerpts from the Op-Ed.
OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment. There is too much worry about the size of government, and too little appreciation for how stimulus spending has helped stabilize the economy and how more of the right kind of government spending could boost job creation and economic growth. By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression.
The primary cause of the labor market crisis is a collapse in private demand — the same problem that bedeviled the economy in the 1930s. In the wake of the financial shocks at the end of 2008, spending by American households and businesses plummeted, and companies responded by curbing production and shedding workers. By late 2009, in response to unprecedented fiscal and monetary stimulus, household and business spending began to recover. But by the second quarter of this year, economic growth had slowed to 1.6 percent, according to a government estimate issued Friday. Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost.
Households and businesses are on a saving spree to rebuild their balance sheets. Their spending relative to income has fallen more than at any time since the end of World War II. So there is now a substantial gap between the supply of goods and services the economy is capable of producing and the demand for them. This gap is starkly reflected by the 23 million Americans who are looking for full-time jobs and the millions more who have left the labor force because they could not find one.
The situation would be even worse without the $787 billion fiscal stimulus package passed in 2009. The conventional wisdom about the stimulus package is wrong: it has not failed. It is working as intended. Its spending increases and tax cuts have boosted demand and added about three million more jobs than the economy otherwise would have. Without it, the unemployment rate would be about 11.5 percent. Because about 36 percent of the money remains to be spent, more jobs will be created — about 500,000 by the end of the year.
But by next year, the stimulus will end, and the flip from fiscal support to fiscal contraction could shave one to two percentage points off the growth rate at a time when the unemployment rate is still well above 9 percent. Under these circumstances, the economic case for additional government spending and tax relief is compelling. Sadly, polls indicate that the political case is not.
To sum up the stimulus is working, but it was too small.
Two forms of spending with the biggest and quickest bang for the buck are unemployment benefits and aid to state governments. The federal government should pledge generous financing increases for both programs through 2011.
Federal aid to the states is especially important because they finance education. Although the jobs crisis is primarily a crisis of demand, it also reflects a mismatch between the education of the work force and the education required for jobs in today’s economy. Consider how the unemployment rate varies by education level: it’s more than 14 percent for those without a high school degree, under 10 percent for those with one, only about 5 percent for those with a college degree and even lower for those with advanced degrees. The supply of college graduates is not keeping pace with demand. Therefore, more investment in education could reduce both the cyclical unemployment rate, as more Americans stay in school, and the structural unemployment rate, as they graduate into the job market.
An increase in government investment in roads, airports and other kinds of public infrastructure would be cost-effective, too, as measured by the number of jobs created per dollar of spending. And it would help reduce the road congestion, airport delays and freight bottlenecks that reduce productivity and make the United States a less attractive place to do business. The American Society of Engineers has identified more than $2.2 trillion in public infrastructure needs nationwide, and a 2008 study by the Congressional Budget Office found that, on strict cost-benefit grounds, it would make sense to increase annual spending on transportation projects alone by 74 percent.
Over the next five years, the federal government should work with state and local governments and the private sector to finance $1 trillion worth of additional investment in infrastructure. It should extend the Build America Bonds stimulus program, which in the past year has helped states finance $120 billion in infrastructure improvement.
The federal government should also create and capitalize a National Infrastructure Bank that would provide greater certainty about the level of infrastructure financing over several years, select projects based on rigorous cost-benefit analysis, invest in things like interstate high-speed rail that require coordination among states and attract private co-investors in projects like toll roads and airports that generate dedicated future revenue streams.
But can the government afford this additional spending? The answer is yes. Despite the large federal deficit, global savers, including savings-hungry American households, are snapping up United States government securities at very low interest rates. And they will continue to do so as long as there is ample slack in the economy and inflation remains subdued. Over the next few years, there is little risk that federal deficits will crowd out private investment or precipitate a crisis of confidence in the American government, a spike in American interest rates or a sudden drop in the dollar.
Let’s fix the problem, once and for all, by keeping people employed (helping the states) and employing more (by rebuilding our crumbling and neglected national infrastructure).
But as Steve Bennen points out in this post, THERE IS NO SECRET ‘BIG ECONOMIC INITIATIVE,’ BUT THERE COULD BE.
If the president were to come out tomorrow to announce an ambitious infrastructure/energy/stimulus plan, focused solely on job creation, Republicans would immediately denounce it as fiscally irresponsible — we couldn’t possibly increase the deficit to pay for this, they’d say.
But in many respects, recent developments have strengthened the hand of stimulus proponents, and it’s a dynamic the Obama White House could take advantage of. For one thing, recent polling suggests Americans much prefer investing in job creation to focusing on deficit reduction. I’m suggesting, then, that the president and his party, shortly before the elections, push a popular idea. In theory, that shouldn’t require too much arm-twisting.
For another, literally every member of the House Republican leadership — Minority Leader, Minority Whip, and Conference Chairman — just this month argued publicly that the economy is more important than the deficit, at least right now. They were talking about defending tax cuts for the very wealthiest Americans, but the underlying point was the same — given the fragile state of the economy, growth and jobs matter more than deficit reduction.
So here’s a radical idea: why not call their bluff? If GOP leaders are willing to increase the deficit to improve the economy, the White House can take them up on their offer — but take every penny Republicans want to devote to tax cuts and invest that money in job creation.
It creates an either/or for the political world and voters to consider. Both sides plan to increase the deficit, so that’s no longer the issue. The question is whether it’s better to devote the resources to tax cuts for the very wealthy, or use the same resources on infrastructure, energy, and stimulus.
A jobs agenda vs. a Billionaire Bailout.
I realize that the likelihood of Congress passing anything in this environment is, to put it charitably, remote. If Republicans aren’t willing to let the Senate vote on extended unemployment benefits, and House Republicans were willing to lay off tens of thousands of school teachers, then winning a vote on job creation is almost certainly impossible.
But why not have the fight anyway? Why not force Republicans to fight against a jobs bill two months before the elections? Why not let the public see exactly what both sides want to do to give the economy a boost, and determine which is preferable?
Why not ask voters which they prefer — a jobs agenda or a Billionaire Bailout?
That’s what the message should be for the next two months. Democrats are for creating jobs, Republicans are for protecting the rich.
