Band-Aids, Bipartisanship and Baby-Steps: How Not to Deal With a Jobs Crisis

Does anyone believe that we would be facing the same lack of urgency about the jobs crisis in Washington if it were the unemployment rate among the top 10 percent that was 31 percent?
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"You can't cross a chasm in two small jumps," said WWI-era British Prime Minister David Lloyd George. And you can't cross it in a series of little steps either.

On the first anniversary of the passage of the stimulus bill, the country's best economic research firms agree that the often-derided bill has added 1.6 million to 1.8 million jobs -- with more on the way. This is obviously good news. But it shows how monumental a chasm we are facing that, even with those jobs, unemployment is still hovering around 10 percent -- and real unemployment at around 17 percent.

With 15 million people out of work (and if we count the underemployed and those too discouraged to look for work, 26 million), and with six unemployed jobseekers for every opening, it's no wonder the New York Times describes the jobs bill taking shape in the Senate as "so puny as to be meaningless."

Less than a month ago, during his State of the Union speech, President Obama declared, "jobs must be our No. 1 focus in 2010." So why is there no sense of urgency coming out of Washington?

Perhaps the reason can be found in the stunning results of a study conducted by Northeastern University's Center for Labor Studies that broke down the unemployment rate by income. Unemployment for those making $150,000 a year, the study found, was only 3 percent in the last quarter of 2009. The rate for those in the middle income range was 9 percent -- not far off the national average. The rate for those in the bottom 10 percent of income was a staggering 31 percent.

These numbers, according to the Wall Street Journal's Robert Frank, "raise questions about the theory behind what is informally known as 'trickle down' economics, since full employment at the top doesn't seem to be translating into more jobs below.'"

In fact, these numbers do more than raise questions -- they also supply the answers.

Does anyone believe that the sense of urgency coming out of Washington wouldn't be wildly different if it was the unemployment rate in the top ten percent that was 31 percent? If one-third of television news producers, pundits, bankers, and lobbyists were unemployed, would the measures being proposed by the White House and Congress still be this pathetic? Of course not -- the sense of national emergency would be so great you'd practically be hearing air raid sirens howling.

Instead we get baby steps, bipartisanship, and band-aids -- timid moves that, given the seriousness of the crisis, threaten to change the very fabric of our society. For much of our history, America was known for its upward mobility -- and the promise that hard work would be rewarded with your children being able to do better than you. That promise has been called into question over the last three decades, and an extended run of high unemployment could be its death knell.

"These are the kinds of jobless rates that push families already struggling on meager incomes into destitution," wrote Bob Herbert. "And such gruesome gaps in the condition of groups at the top and bottom of the economic ladder are unmistakable signs of impending societal instability. This is dangerous stuff."

So dangerous, in fact, that when it comes to jobs we can't afford a repeat of the health care reform fiasco, in which the president decided to sit out the debate, emerging only to give vague statements of encouragement and cryptic pronouncements about what he actually favored (does anyone, even at this late date, have a clue what that was, by the way?).

Already, the latest jobs bill is barely more alive than its near-comatose health care and financial reform cousins. It was a good sign last week when Harry Reid took the jobs bill away from Senators Max Baucus and Charles Grassley, who, under the increasingly fetid banner of "bipartisanship," were busy larding it up with all sorts of giveaways to big business and K Street. Republican senators responded to the move by taking to their fainting couches, but it was clear that the concessions being made to secure a "bipartisan" bill meant, essentially, a worthless bill.

"It does show," TNR's Jonathan Chait wrote, "just how steep the price of securing bipartisan support actually is -- you're reduced to essentially symbolic legislation."

So going mono-partisan was good. What wasn't good was replacing the bipartisan bill with measures that were simply way too small in scope. The provisions Reid proposes -- a Build America Bonds program for state government infrastructure needs, a small business tax credit, a payroll tax holiday -- are good, just grossly inadequate.

As James Galbraith notes, "we have to turn the corner on the notion that this is just a pump that needs to be primed, an engine that needs to be restarted, something that can be kicked back into functioning form with a little extra federal spending."

So what sorts of ideas are out there that Congress and the president should be considering?

• The most immediate step -- and one of the most effective -- is direct aid to local and state governments. Since August of 2008 over 150,000 state and local jobs have been eliminated, and, according to CNNMoney, states are currently looking at a total budget gap of $180 billion for fiscal 2011. The Center on Budget and Policy Priorities estimates that state and local deficits could cost the country an entire point off the GDP, which would in turn lead to the loss of another 900,000 jobs next year. This is why the Economic Policy Institute recommends the federal government spend $150 billion on aid to state and local governments over the next year and a half, an investment that would save up to 1.4 million jobs.

The Reid bill, by the way, contains no state aid (although he hopes to back a state aid measure in the future).

Former Labor Secretary Robert Reich also favors direct aid to state and local governments, as well as a focus on helping troubled homeowners by letting them include their outstanding mortgage in personal bankruptcy, which, as Reich notes, "would give them far more bargaining leverage with mortgage lenders."

• Create public service jobs. "The federal government could provide jobs by... providing jobs," writes Paul Krugman. "It's time for at least a small-scale version of the New Deal's Works Progress Administration... There would be accusations that the government was creating make-work jobs, but the W.P.A. left many solid achievements in its wake. And the key point is that direct public employment can create a lot of jobs at relatively low cost."

In fact, the EPI estimates that one million jobs could be created with an investment of $40 billion a year for three years.

This approach is also favored by Princeton's Alan Blinder. "Direct public-service employment is straightforward," he wrote. "As long as the new government jobs do not compete with the private sector, the net job creation should be one-for-one. So hire people to repair parks, not shopping malls."

• Incentivize Green jobs. To take just one example, as the rest of the economy was shedding jobs, the solar energy industry added nearly 20,000 jobs last year. Rhone Resch, head of the Solar Energy Industries Association, estimates that the solar industry could add up to 45,000 jobs in 2010 if Congress renews various incentive programs that are expiring this year.

• Rebuild the nation's infrastructure. A study by the Alliance for American Manufacturing concluded 2.6 million jobs could be created with $148 billion in infrastructure spending.

One way to finance this rebuilding would be through a National Infrastructure Bank, which has been proposed by Senator Chris Dodd and Congresswoman Rosa DeLauro. The idea has been given a boost by the president, who proposed giving it $25 billion over the next five years.

An example of what a real -- and really bold -- infrastructure jobs program can look like was provided by China. The Chinese bullet train, with the world's highest average speed, will be opening its Guangzhou to Wuhan line by 2012. It will go 664 miles in just more than three hours and is one of 42 lines that will be opening in two years. China's national high speed rail program was originally slated to be finished in 2020 but, because of the financial crisis, they moved up the date by eight years and spent $100 billion to do it, in the process giving productive jobs to tens of thousands of workers who were about to be laid off.

Meanwhile, in the U.S., we're hoping to have one 84-mile high speed rail line between Tampa and Orlando done by 2014.

• Economist Dean Baker suggests the promotion of publicly-funded prescription drug trials. "A direct result of government-granted patent monopolies is that prescription drugs are often incredibly expensive," writes Baker. With government-funded trials, "all the results would be fully public and available to all researchers as soon as practical," and "the government would pay much lower prices for the drugs for which it funded the clinical tests."

Will all this be expensive? Yes. But in the long run, not nearly as costly as long-term unemployment and the crumbling of America's middle class. The good news for Obama and congressional Democrats is that a robust jobs bill is not only the right policy, but good politics as well. As Nate Silver writes: "The jobs bill -- specifically, a $100 billion jobs bill that would consist of a combination of tax credits and infrastructure programs -- is favored 72-22 (!) by the public according to [a recent] Quinnipiac poll." So why have the Democrats, as Silver writes, "let it devolve into yet another process story while at the same time limiting their options to a menu of choices all of which seem inadequate to the scope of the program?"

It's unclear. Again and again, the administration has had the opportunity to show that it gets what's happening outside the fully employed sectors of Wall Street and Washington. And again and again, it comes up short.

It's time for something bold. Unfortunately, we've now seen enough of President Obama to know that boldness isn't exactly his forte. Bold rhetoric at times, sure, but not bold action. His natural caution and incremental approach would be well-suited to many times -- but this is not one of them. The jobs crisis is simply too large and the suffering too great. Obama needs to put aside the clichés about changing how Washington works and change the way he works.

The chasm America has fallen into cannot be crossed with bipartisan baby steps. The president needs to grab Congressional Democrats by the hand... and leap. How Obama responds to this crisis will not only define his presidency, but the long-term future of our nation.

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