As the Recession Deepens the Need for Jobs! Jobs! Jobs! and an Economic Stimulus Gain Greater Importance Every Day

Writing in the New York Times, Bob Herbert comments on an increasingly worrisome problem for our nation: "Another month, another half-million Americans out of work. The ranks of the unemployed have now stretched beyond 11 million, and millions more are underemployed — working part time, for example, because they can’t find full-time jobs." And Mr. Herbert continues with some depressing statistics: "As bad as this sounds, the reality confronting working men and women is actually significantly worse. Some 2.6 million jobs have been lost since December 2007, and as the Economic Policy Institute tells us: “Just to keep up with the ever-expanding labor force, the economy would have needed to create 1.5 million jobs over the last 12 months. This means that the 2.6 million jobs lost leaves us over 4 million jobs short of what the economy required to provide employment for the American work force.” It's an obvious statement of fact; America needs to much better with job creation than just keeping up with the jobs that have been lost! The nation's listless job growth figures show unemployment at 7.2 percent. But those numbers, as bad as they are; just expose the tip of the iceberg when Herbert points out the even more depressing information that: "...more than one in every eight workers in America is jobless or underemployed. That’s 21 million people. And it’s not even counting the so-called discouraged workers, who have given up looking for a job." When it can be expected that jobs will generally increase in November and December in response to the holiday season, the statisticians tell us that over a million jobs were lost! And the trend of job loss will continue through 2009 unless something is done -- immediately! David Leonard tracks job information in Economix, one of the blogs published by The New York Times, which recently confirmed the nation's job crisis when Leonard wrote: “The share of all men ages 16 and over who are working is now at its lowest level since the government began keeping statistics in the 1940s. The share of women with jobs has fallen almost two percentage points from the peak it reached in 2000. At no other point in the past 50 years has the share of employed women fallen so much from its peak.” David Leonard gets it, and so does Bob Herbert! They're not overstating what the unemployment figures show; Herbert explains: "This is an emergency. There is one overriding mission for the incoming Obama administration when it comes to dealing with the economy, and that’s putting Americans back to work. Forget the G.O.P.’s mania for tax cuts. Forget, for the time being (but not forever), the ballooning budget deficits. Forget the feel-good but doomed-to-fail effort to play nice-nice with the rabid partisans of the right who were the ones most responsible for ruining the economy in the first place." Herbert understands the need for the federal government to take quick action: "Put the people back to work!" It's the nations top priority! Herbert recognizes: "To do that, Democrats will have to overcome their natural timidity. They will have to fend off the Republican opposition in Congress and set in motion an enormous surge of public spending aimed at creating jobs, jobs, jobs. Each new surge of job losses is an additional violent assault on the already profoundly damaged economy. Idle workers do not pay taxes and that ratchets up budget deficits at the federal, state and local levels. They draw down unemployment benefits and further strain the Medicaid rolls. In many cases, they are forced to turn to food stamps for their families’ daily bread. And, of course, they stop purchasing cars and homes, goods and services." And as for those Republican proposals to use stimulus rebate checks to put 'money directly into the hands of the American people.' That's nothing more than a trick directly out of the GOP playbook that is an overused 'feel good' ploy intended to simply spread around some instant gratification, that in reality will be spent by the poor to momentarily keep their heads above water; or saved by the more affluent who don't need it as badly for everyday expenses and will more than likely just drop it in their savings account or stock portfolio because they are more secure financially. Herbert elaborates on my point: "The economy will not be saved by putting a pitiful $500 into the hands of the average taxpayer. And it won’t be saved by gift-wrapped concessions to the G.O.P. in the form of business tax cuts that the president-elect is said to be considering. With credit tight, savings depleted, the stock market in the tank and home prices in a state of collapse, the only way to get real money into the hands of ordinary Americans (and thus back into the economy) is through employment. The way to truly stimulate the economy and save the jobs of anxiety-ridden workers who are still employed is to get the unemployed back to work as soon as possible." Hebert's call "to create jobs is through infrastructure investments (building and repairing roads, bridges, tunnels and water and sewer systems); and by investing in 21st-century clean energy initiatives, in public transportation systems, and in school construction; and by providing access to health care for the millions who don’t have it. In other words," Herbert argues: "by investing in the people and the enormous productive capacity of the United States." Someone else who gets it is "Senator Tom Harkin of Iowa" a self-professed liberal who "was blunt this week after he and other Senate Democrats met with Obama aides to discuss the president-elect’s stimulus package. “There is only one thing we have got to do in the stimulus, and that is how can we create jobs,” he said. Referring to Mr. Obama’s national economic adviser, Lawrence Summers, Mr. Harkin added: “I am a little concerned by the way that Mr. Summers and others are going at this in that, to me, it still looks like a little more of this trickle down. If we just put it in at the top, it’s going to trickle down.” Obama needs to be true to his campaign promise of restoring and creating jobs that flow upwards from the bottom rungs of the economy. 'Jobs from the bottom up' Obama liked to say while he campaigned. Obama must create lots of good paying jobs for the neediest Americans stuck at the bottom of the economy! Don't be fooled by the decades of propaganda that the Republicans have dished out since Reagan declared that "government is the problem!" Reagan is dead. And the self serving, deceitful propaganda that he spread about how the 'free market' can be counted on to bring prosperity to all Americans must be buried deep below the 'great communicator.' Don't believe any Republican, any Conservative or any other right wing ideologue that claims that government cannot create jobs because it only gets in the way of free enterprise. Right now, the government is the only entity with access to capital that can be used to create jobs. Americans need to remember that half of the $700 billion bailout that was appropriated for the Wall Street bailout that Bush and his cronies in the Treasury Department pushed down the American people's throats sits without any oversight rules or terms of accountability in bank vaults across the country paying executive bonuses and being used to send those same executives on pleasure trips to luxurious locations. And whats left of the $700 billion is being fought over by Bush officials and by Obama's economic team and Democrats in Congress who are hurriedly working around the clock to bring about the reallocation of the remaining $350 billion of financial aid that they intend to use to prevent foreclosures faced by homeowners; bring stability to the economy; and stimulate the credit markets to spur consumer and business loans. The importance of creating an abundance of good paying jobs that helps to rebuild the lower and middle classes while rebuilding the American economy cannot be overstated. Jobs! Jobs! Jobs! That's the only way that Obama can fulfill the promise of change he campaigned on. It's the only way we can fix our country's recession and prevent the coming of a second Great Depression. Meanwhile, David Cho and Lon Montgomery, staff writers for the Washington Post, report that: "Senior Bush administration officials, consulting with the Obama transition team, have prepared a plan to ask lawmakers for the second half of the $700 billion financial rescue package despite intense opposition in Congress, sources familiar with the discussions said." The remaining $350 billion would be used by the Bush Administration to complete funding of the administration's original plan that has garnered such intense opposition by the public and the Congress. The Washington Post reporters explain that: "Under the emergency rescue legislation approved by Congress in October, the administration must inform lawmakers that it wants access to the second installment of $350 billion. Unless Congress passes a resolution rejecting the request within 15 days, the Treasury can begin to tap the funds. If Congress turns down the request, the president could veto the resolution and then the Treasury could proceed. The money would be blocked only if Congress overrides the veto, which would require a two-thirds majority in both chambers." Which many House members believes to exist. A noteworthy development of events would ensue if Bush decided to seek the funds which: "could create an unusual political scenario straddling the Bush and Obama administrations. If Congress were to vote down the measure, either President Bush or Obama would have to exercise a veto to get the money. "Obama officials would prefer that Bush exercise any veto rather than leave the new president with the unsavory task of rebuffing his fellow Democrats in Congress to advance a widely unpopular program, sources said. The White House has declined to say publicly whether Bush would be willing to issue the veto." The Bush administration explained that: "There have been discussions between the administration and the transition team on how to proceed should the president-elect determine that he would like President Bush to notify Congress on his behalf of the intent to use the remaining $350 billion so that it will be available early in the new administration," White House press secretary Dana Perino said. "No final decisions have been made." Cho and Montgomery report that: "Democratic Senate aides were notified in a meeting yesterday afternoon that the request could come as soon as this weekend and that a vote could be held as early as next week, said congressional sources, who spoke on the condition of anonymity because no decisions have been made." Without the existence of an agreed to plan by the incoming and outgoing administrations no decisions on the $350 billion can be easily executed and the monies represent an important means for aiding the economy. Congress is taking proactive steps: "Even as senior Bush and Obama officials consulted about how to access the rest of the money, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, unveiled a bill on Capitol Hill aimed at forcing the Treasury to use the money in accordance with lawmakers' wishes." And the Post reports that: "Many of the measure's provisions are being coordinated with Treasury Secretary nominee Timothy F. Geithner, who is planning to expand the scope of the rescue program well beyond the financial system to help ordinary consumers and homeowners, as well small businesses and municipalities. Frank said in a news conference yesterday that his bill might not be needed if the Obama administration promised to abide by its principles. "It doesn't have to be enacted. It would be helpful if it was," Frank said. "We have smart and cooperative people in this [incoming] administration, I'm willing to accept their word that they will act as if it were the law. Frank's bill would mandate that the Treasury allocate at least $40 billion for foreclosure prevention. Banks and other institutions that receive funds from the Troubled Asset Relief Program, or TARP, would be required to account for the use of the money. Clear limits on executive compensation would be imposed on all firms that take federal aid, including those that already received money." If Congressman Frank's bill passes, he hopes to convince fellow House members to release the TARP monies. Cho and Montgomery speculate that: "Without Frank's bill, House leaders are convinced that lawmakers would block release of additional funds to the Treasury, which is widely viewed by lawmakers as having rushed the bailout through Congress and then badly mismanaged the program." It has been common knowledge, explain the Post reporters, that: "A majority of lawmakers in both parties are strongly resistant to giving more money to continue the program, Democratic leaders say, adding that a request from either administration is likely to be rejected, making a veto almost unavoidable." And whether it is Bush, who, in his final days would find it easier to veto Frank's Democratic legislation; or if it is left to Obama to strike the veto against his own party, the results will hold extreme importance to the future course of the nation's economy.

Obama Stimulus Plan Must End the Bush Doldrums

Soon to be president Barack Obama may be using strong words to describe the state of our nation's economy; but his stimulus plan is coming up short for what's needed to kick the country out of its Bush doldrums. “I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years.” Paul Krugman agrees with Obama's explanation "why the nation needs an extremely aggressive government response to the economic downturn... He’s right. This is the most dangerous economic crisis since the Great Depression, and it could all too easily turn into a prolonged slump." On what he refers to as the Obama Gap, Krugman complains that: "... Mr. Obama’s prescription doesn’t live up to his diagnosis. The economic plan he’s offering isn’t as strong as his language about the economic threat. In fact, it falls well short of what’s needed." Krugman explains: "Bear in mind just how big the U.S. economy is. Given sufficient demand for its output, America would produce more than $30 trillion worth of goods and services over the next two years. But with both consumer spending and business investment plunging, a huge gap is opening up between what the American economy can produce and what it’s able to sell. And the Obama plan is nowhere near big enough to fill this “output gap.” Just this week, Krugman explains: "the Congressional Budget Office came out with its latest analysis of the budget and economic outlook. The budget office says that in the absence of a stimulus plan, the unemployment rate would rise above 9 percent by early 2010, and stay high for years to come. Grim as this projection is, by the way, it’s actually optimistic compared with some independent forecasts. Mr. Obama himself has been saying that without a stimulus plan, the unemployment rate could go into double digits." More precisely, Krugman details the crux of his problem with Obama's plan that: "Even the C.B.O. says, however, that “economic output over the next two years will average 6.8 percent below its potential.” This translates into $2.1 trillion of lost production. “Our economy could fall $1 trillion short of its full capacity,” declared Mr. Obama on Thursday. Well, he was actually understating things. To close a gap of more than $2 trillion — possibly a lot more, if the budget office projections turn out to be too optimistic — Mr. Obama offers a $775 billion plan. And that’s not enough." Of course, Krugman continues: "... fiscal stimulus can sometimes have a “multiplier” effect: In addition to the direct effects of, say, investment in infrastructure on demand, there can be a further indirect effect as higher incomes lead to higher consumer spending. Standard estimates suggest that a dollar of public spending raises G.D.P. by around $1.50. But only about 60 percent of the Obama plan consists of public spending. The rest consists of tax cuts — and many economists are skeptical about how much these tax cuts, especially the tax breaks for business, will actually do to boost spending... The bottom line is that the Obama plan is unlikely to close more than half of the looming output gap, and could easily end up doing less than a third of the job." Krugman wants to know: "Why isn’t Mr. Obama trying to do more?" Is the "fear of raising the debt causing Obama's hesitancy because dangers do exist "with large-scale government borrowing — and this week’s C.B.O. report projected a $1.2 trillion deficit for this year. But," Krugman complains; "it would be even more dangerous to fall short in rescuing the economy." Obama did say, Krugman reiterates: “I don’t believe it’s too late to change course, but it will be if we don’t take dramatic action as soon as possible. If nothing is done, this recession could linger for years.” And Krugman realizes: "there’s a real risk that we’ll slide into a prolonged, Japanese-style deflationary trap — but the consequences of failing to act adequately aren’t much better." Krugman is truly perplexed and is searching for answers: "Is the plan being limited by a lack of spending opportunities? There are only a limited number of “shovel-ready” public investment projects — that is, projects that can be started quickly enough to help the economy in the near term. But there are other forms of public spending, especially on health care, that could do good while aiding the economy in its hour of need. Or is the plan being limited by political caution? Press reports last month indicated that Obama aides were anxious to keep the final price tag on the plan below the politically sensitive trillion-dollar mark. There also have been suggestions that the plan’s inclusion of large business tax cuts, which add to its cost but will do little for the economy, is an attempt to win Republican votes in Congress." Krugman concludes without determining Obama's hesitancy to act boldly: "Whatever the explanation, the Obama plan just doesn’t look adequate to the economy’s need. To be sure, a third of a loaf is better than none. But right now we seem to be facing two major economic gaps: the gap between the economy’s potential and its likely performance, and the gap between Mr. Obama’s stern economic rhetoric and his somewhat disappointing economic plan." In addition, Obama seems to be content with just getting the employment rate to cover the 2.5 million jobs lost last year when he should be concentrating on magnifying job production beyond his break even point. Obama has three factions of his own party pushing him in three different directions: conservative Democrats are highly critical of the cost of the stimulus plan; moderate Democrats are paralyzed by the thought of adding to an already huge deficit; and liberal Democrats are seeking a larger stimulus package that pumps more money into the infrastructure work that is sorely needed, pushes us more rapidly toward green energy projects and increases spending for social programs. All the while Republicans are clamoring for tax breaks and incentives to spur on the private sector. Forget the thirty years plus of supply side, deregulatory solutions that "trickle-downed" us all the way into the economic abyss we find ourselves in today. Let the Keynesian approach lead the country to better times. Only the government can currently create the jobs we need to gain economic recovery. By your own admission, time is growing short. Obama is rapidly approaching the time when he must move from trying to listen and consider everyone's differing viewpoints and boldly act to energize the economy from the ground up as he so eloquently phrased during the campaign. He must craft a stimulus package that create jobs; lots of jobs that will raise the spirits of the people hurting the most at the bottom of the economic ladder. Jobs that will raise people's standard of living. Mr. Obama and the Democrats have the backing of the nation to turn the economy around, and they have control of the presidency and the Congress. The time to act is upon us as a nation. Mr. Obama must gather all the eloquence he can muster and give the American people the straight talk they're waiting to hear. Catering to wholly bipartisan initiatives will only slow down and cripple the stimulus. Obama needs to show Americans a grittier edge in his assessments of the economy. He must rise the nation beyond the "output gap" he is allowing to sabotage his stimulus package. Obama's got to get tougher with the politicians and interest groups that stand between him and his ability to give American's what they desperately need! Jobs! Jobs that will pay the people the money the nation needs to rise above the crippling fears caused by the Bush doldrums!

The Fight Against an Impending Economic Depression

Paul Krugman comments in the New York Times that: "If we don’t act swiftly and boldly,” declared President-elect Barack Obama in his latest weekly address, “we could see a much deeper economic downturn that could lead to double-digit unemployment.” If you ask me, he was understating the case." Such is the response Krugman chooses to give. Krugman continues: "The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression." Krugman inquires: "So will we “act swiftly and boldly” enough to stop that from happening? We’ll soon find out." Krugman explains that: "We weren’t supposed to find ourselves in this situation. For many years most economists believed that preventing another Great Depression would be easy. In 2003, Robert Lucas of the University of Chicago, in his presidential address to the American Economic Association, declared that the “central problem of depression-prevention has been solved, for all practical purposes, and has in fact been solved for many decades.” In addition, Krugman explains: "Milton Friedman, in particular, persuaded many economists that the Federal Reserve could have stopped the Depression in its tracks simply by providing banks with more liquidity, which would have prevented a sharp fall in the money supply. Ben Bernanke, the Federal Reserve chairman, famously apologized to Friedman on his institution’s behalf: “You’re right. We did it. We’re very sorry. But thanks to you, we won’t do it again.” Krugman does not believe "that preventing depressions isn’t that easy after all. Under Mr. Bernanke’s leadership, the Fed has been supplying liquidity like an engine crew trying to put out a five-alarm fire, and the money supply has been rising rapidly. Yet credit remains scarce, and the economy is still in free fall." Krugman disputes "Friedman’s claim that monetary policy could have prevented the Great Depression was an attempt to refute the analysis of John Maynard Keynes, who argued that monetary policy is ineffective under depression conditions and that fiscal policy — large-scale deficit spending by the government — is needed to fight mass unemployment. The failure of monetary policy in the current crisis shows that Keynes had it right the first time. And Keynesian thinking lies behind Mr. Obama’s plans to rescue the economy." Regardless of the overwhelming dire economic situation staring us in the face, Krugman realizes that the return to Keynesianism will be very difficult politically. Krugman assesses that "the political posturing has already started, with Republican leaders setting up roadblocks to stimulus legislation while posing as the champions of careful Congressional deliberation — which is pretty rich considering their party’s behavior over the past eight years. More broadly, after decades of declaring that government is the problem, not the solution, not to mention reviling both Keynesian economics and the New Deal, most Republicans aren’t going to accept the need for a big-spending, F.D.R.-type solution to the economic crisis." Krugman foresees: "The biggest problem facing the Obama plan, however, is likely to be the demand of many politicians for proof that the benefits of the proposed public spending justify its costs — a burden of proof never imposed on proposals for tax cuts." Krugman elaborates on this conundrum by providing some insights into Keynes approach to such a difficulty: "This is a problem with which Keynes was familiar: giving money away, he pointed out, tends to be met with fewer objections than plans for public investment “which, because they are not wholly wasteful, tend to be judged on strict ‘business’ principles.” What gets lost in such discussions is the key argument for economic stimulus — namely, that under current conditions, a surge in public spending would employ Americans who would otherwise be unemployed and money that would otherwise be sitting idle, and put both to work producing something useful." Krugman is well aware of the reality of the legislative process and its shortcomings: "All of this leaves me concerned about the prospects for the Obama plan. I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized. And Mr. Obama is right: We really do need swift, bold action. Here’s my nightmare scenario: It takes Congress months to pass a stimulus plan, and the legislation that actually emerges is too cautious. As a result, the economy plunges for most of 2009, and when the plan finally starts to kick in, it’s only enough to slow the descent, not stop it. Meanwhile, deflation is setting in, while businesses and consumers start to base their spending plans on the expectation of a permanently depressed economy." Krugman strongly believes that "this is our moment of truth." And he asks: "Will we in fact do what’s necessary to prevent Great Depression II?" A prescient question that recognizes the power of political obfuscation over matters of economic reality.

The Keynsian Return

Scot Lehigh in the Boston Globe paraphrases John Maynard Keynes prescient observation "that recessions weren't necessarily self-correcting, as economic conventional wisdom assumed, and that governments needed to intercede to boost economic activity in troubled times. Keynes view on economics took root in America during the struggle against the Great Depression and helped to form the dominant economic outlook of the nation. With the "conservative ascendancy" of Ronald Reagan, Keynesianism was supplanted by supply side economics. An economic theory that was first mentioned by conservative commentator Jude Wanniski in 1975 and was based on the work of Robert Mundell and Arthur Laffer. Commonly referred to as "trickle down economics," Supply Side adherents ridiculed "Keynesian notions of government intervention, and particularly deficit spending to spur economic activity." Although GOP presidents amassed "large budget deficits created by tax cuts" conservative ideologues ignored the debt and "put their rhetorical faith in untrammeled free market economics, (while preaching) the importance of fiscal discipline." With the rush to deregulate the financial markets in the 1990s under President Clinton and a Republican Congress, actions were taken that set the stage for the economic crisis we are currently experiencing. Luckily, Keynesianism has made a return as a viable method to achieving economic recovery. Even George Bush 43, the MBA president, has "been a deficit-spender for almost his entire presidency,.. has now gone further, arguing that the prospect of calamity necessitates wide-ranging government intervention to stabilize the economy. Bush, the Ronald Reagan-inspired conservative free marketer and supply sider, has chosen to take a Keynesian approach to get us out of our current mess. "Meanwhile, amid a growing consensus that only more government spending can stave off a deep recession, President-elect Barack Obama is planning a major stimulus program to inject more demand into the economy ... All in all, it's quite a vindication, one that would both gratify and amuse John Maynard Keynes." We are not quite out of the woods yet, however. We face many uncertainties and better days are years away. The economic policies foisted upon America over the last 30 years by the conservative Reagan Revolution have created conditions that could surpass the damage inflicted by the Great Depression and we can only hope that Keynes return can relieve our economic misery. If we are lucky and Obama's recovery plan succeeds, let us gain from our experience and never allow Keynesian policies to be shoved aside again.