"Better Than Nothing" -- But We Need Much More When it Comes to Creating Jobs

The administration's alternative of emphasizing small business has the potential to create only several million jobs in the medium term. We need two or three times more jobs today than what the administration's three job stimulus initiatives will create over time -- on the order of 15 million more -- in order not to lose another decade to wage stagnation, extreme income inequality, and wide-scale unemployment.
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For the entire eight years of the Bush administration, those of us on the progressive side learned to live with the legislation and policy 'standard' of "better than nothing". Heck, they pretty much hated us, and "better than nothing" was, well, better than nothing.

But it is beyond disappointing that in just 18 months this standard which is usually reserved for the minority Party has largely become President Obama's standard on what he promised were going to be the most immediate and urgent priorities of his new administration: job-creation and reordering our global trading, especially our trade with China which has been eating the average American worker's lunch for more than a decade.

We are stuck in a jobless recovery with a real unemployment rate of nearly 20%, with even the 'false-positive' indicator of GDP growth that the administration wrongly relies on as its sole measure of economic vitality now at only a meager 2.4% annualized rate, versus the revised 3.7% rate of the previous few months. Yet the administration finds laudable - and seemingly sufficient - the 3.0 to 3.5 million jobs that it contends the 2009 federal stimulus bill will have "created or saved" (mostly just saved) by the end of this year, and, even more concerning, the relatively few 5 to 7 million jobs which it believes its three major jobs initiatives will create over the next five years.

This latter number unfortunately is but a small fraction of the 22 million jobs we are missing today in order to 'fully employ' (i.e., a 5% unemployment rate) the 30 million real unemployed workers stuck in one of the four unemployment categories: "official", part-time-of-necessity, marginally attached, and discouraged and out of the workforce because they believe no jobs are available for them.

According to Obama's chief of staff Rahm Emanuel, "Made in America will become the big theme" of the President's pre-election push in coming weeks, and he will "focus on [sub] themes appealing to the economically battered electorate, including policies aimed at keeping jobs in the U.S." Emanuel says that this push will go beyond creating "clean-energy jobs to include more traditional industries such as automobiles and railroads", and, according to Robert Gibbs, the President "will also seek Senate passage of proposals to change tax provisions that he says encourage businesses to ship jobs overseas".

However, all the way back in July 2008, then Candidate Obama told the United Steel Workers that, "Change is ending tax breaks for companies that ship jobs overseas and giving them to companies that create good paying jobs here in America; it's putting people to work...making the materials we need to rebuild America; it's...creating millions of new jobs - jobs that we want to be good union jobs - and giving our workers the skills to do them."

So there you have it: 24 months after Obama's speech to the Steelworkers and 18 months after his Inauguration, we hear from Mr. Emanuel that "Made in America" and "ending overseas tax breaks" are finally to be the President's upcoming themes for the Fall 2010 Congressional campaigns.

And political commentators and pollsters wonder why so many of us on the progressive, pro-worker side of American politics are so frustrated and cynical.

The House recessed for the summer late last week, and the Senate is scheduled to recess on August 6. When they go home, Members of Congress would be well-advised to listen to the will of the people which, according to numerous recent polls, is easily summarized:

•Voters are still looking for Congress to act on jobs, which they continue to see as far and away the biggest problem facing the economy. By a margin of two-to-one, they still want to see much more attention paid to jobs initiatives than to a long-term deficit reduction program.

•The vast majority of voters, on the order of 70% of total voters, want newly formed independent government agencies - both a "national infrastructure bank" and a "green bank" - to invest in infrastructure generally, transportation and clean energy and in other areas that create jobs. Notably, the same vast majority wants to "put unemployed people back to work at government-funded public service jobs that meet important community needs".

•Sixty percent or so of voters favor tougher regulations to limit imports of foreign goods. They believe that foreign trade has been bad for the U.S. economy because imports have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products - and they say this despite cheaper imported goods crowding the shelves at Wal-Mart and elsewhere. In fact, poll after poll now shows Americans preferring by solid margins good paying jobs here at home to cheaper prices.

•Half of all voters believe that free trade agreements or FTAs lead to job losses in the U.S., while just 12% say that such agreements have created jobs. Offshoring of jobs has reached a tipping point as an issue for the American public - around 80% are "concerned" and 50% "worry a lot". Eighty percent of voters give recent administrations, including President Obama's, very low grades (C, D or F) on their handling of these two related issues.

When Congress returns to Washington in September, Members would then be well-advised to publicly embrace those jobs-related and trade policy initiatives which voters are demanding. Job creation especially may be the one area where something close to consensus can be achieved, provided the associated initiatives are at least deficit neutral and ideally deficit reducing in the medium term. And the urgency to act is obvious: first is the election coming up just eight weeks from now on November 2; second is the fact that by the end of the year the remaining funds from 2009's federal stimulus bill will have essentially been exhausted; and third is the reality that jobless recoveries don't ever just fix themselves.

The four major initiatives that we know would most quickly create millions of new jobs - and do so in fiscally responsible ways - are:

1.Invest substantially in the nation's ailing and missing infrastructure under "buy domestic" procurement rules and with funding from a new national infrastructure bank or entity that would mostly be privately capitalized and thus removed from the annual federal budget and deficit. Each $1 billion that goes toward infrastructure creates at least 25,000 and upwards of 45,000 permanent job.

2.Establish employment programs for the 5 million out-of-school unemployed youth.

3.Take the steps needed to 'rebalance' the U.S. economy: (i) sectorally, back toward manufacturing; (ii) regionally, in order to smooth the vast geographic disparities which exist today; and (iii) in favor of private (instead of public) sector growth. Of these three areas, the biggest challenge - but the one with the greatest potential long-term impact - is on the sectorally, where the objective should be to quickly at least double the size and the impact of our nation's manufacturing sector. While a country with as large and diverse a population as America's can't fairly prosper with entire regions relatively disadvantaged and balance its budget with one out of every 5 or 6 non-farm jobs being in the public sector, it especially can't succeed and sustain itself with only around 11% of workers and GDP coming from manufacturing.

4.Abandon the deeply flawed pending FTAs with South Korea, Panama and Colombia, since each of these proposed FTAs strongly favors, in one or more ways, the 'other guy' and will be a 'U.S. jobs killer'. Instead, as was promised during the 2008 campaign, focus primarily on existing specific country trade imbalances and on trade cheating wherever we encounter it. Of course, this means that most such efforts should be directed at China, the nation with which the U.S. has by far the largest trade deficit, and its pervasive mostly-illegal subsidies.

These four initiatives could quickly create most of the 22 million jobs we are 'missing' today. By contrast, the administration's three remaining major jobs initiatives, while certainly "better than nothing", will create, even over many years, but a fraction of the jobs we need. They are:

I.Doubling over five years U.S. gross exports, which the President estimates will create 2 million jobs. This figure contrasts poorly with the more than 6 million lost to offshoring in just the last decade, and the goal of targeting gross exports is misplaced since what matters in trade is net exports or, better said, import substitution.

II.Exploiting 'green jobs' opportunities. Yet no more than 20 million such jobs are forecasted to be created worldwide over the next 20 years, and thus we should expect that no more than 3 to 5 million of these jobs will land on our shores over many years and that's only if we enact "buy domestic" government procurement requirements that mirror those of our major trading competitors.

III."Putting small-business proposals at the center of efforts to revive [the] still-sluggish economy", including a $30 billion lending fund designed to give incentives to community banks to lend to small businesses.

This third initiative of the President's, upon which the White House seems to be especially reliant, deserves additional comment since it almost completely misreads the jobs predicament in which the country languishes. In fact, it is big(ger) business which has the primary role today in resuscitating our broken economy, not small business.

Labor economists and politicians alike fell in love with pumping up small businesses when Ronald Reagan became president, but that was only after big business had established what was thought to be a largely non-erodible industrial foundation for the country, a foundation that would withstand and in fact prosper from the 'globalization' that was coming down the pike. To put this in context, for the first half of the last century, manufacturing constituted about 35% of the nation's GDP, and even after our GIs returned home from World War II and military production ceased, manufacturing in 1947 still made up 26% of GDP. And manufacturing never went below 21% until 1980, when it began its persistent decline to the low 11% level it stands at today. Of course with this decline millions of good American jobs were shipped overseas.

Twenty-two million new jobs is the almost incomprehensible equivalent of having to create 140 new Boeing Companies or 90 new General Motors. And the simple truth is that there is no way on God's green earth to create them without the massive - and primary - involvement of 'big business', especially 'big manufacturing business'. The administration's alternative of emphasizing small business has the medium-term potential to create only several million jobs in the medium term.

Obviously, we need two or three times more jobs today than what the administration's three initiatives will create over time - on the order of 15 million more - in order not to lose another decade to wage stagnation, extreme income inequality, and wide-scale unemployment.

Leo Hindery, Jr. is Chairman of the US Economy/Smart Globalization Initiative at the New America Foundation and a member of the Council on Foreign Relations. Currently an investor in media companies, he is the former CEO of Tele-Communications, Inc. (TCI), Liberty Media and their successor AT&T Broadband. He also serves on the Board of the Huffington Post Investigative Fund.

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