Unemployment Trumps Debt


The jobs numbers are out. Unemployment is rising across the board again, for the second month in a row, and it is now 99 percent certain that the private economy is not going to cause the numbers to change direction. Yet this expectation was the foundation argument behind the president’s pivot toward debt negotiations with Republicans since the last election: “now hat recovery was underway, that unemployment numbers were bad but slowly improving, we can focus on debt.”

So, it was argued, the President can turn to deal with the deficit and stop even talking about further stimulus and jobs programs. Unfortunately this put him in the position of debating on Republican terms which can be summarized as "no taxes for the rich, cut, cut, layoff, layoff and blame the administration for any ill effects." Obama retained a priority in the January temporary del on long term investments in green technologies, infrastructure, education, and the already enacted but fragile Health Care Reform act. And he did not give up his plan to return to the tax exemptions for the rich later.

Nonetheless, the Republicans seized the initiative and this “confidence fairy” optimism about the pleasures of satisfying private investors resulted in extending the Bush tax cuts for the rich, while forcing substantial cutbacks in government programs. Obama and his chief advisers were criticized strongly by the best-scoring forecasters. The stimulus – only half the size needed from the start – pulled back federal funded employment  dramatically, by nearly a million jobs. 577,000 state and local government workers lose their jobs since 2008 and the rate of decline is now accelerating with withdrawal of the stimulus. Private enterprise is not hiring, and not because of insufficient tax cuts – they have billions sitting in the stock market, banks and bonds. They are not hiring because no one is coming in the stores. 

Quelle Surprise! the pitiful rate of employment recovery softened in April and now has collapsed. 

Still, free-market ideologues are hoping for a miracle, like really cheap oil, or the rapture, or blaming it all on unions, or mismatched workers, or the “bond vigilantes” Anything to save them seeing the obvious – the absolute necessity of doing something about unemployment. All these these madcap obsessions with imaginary ‘white whales’ or other thoroughly refuted diversions must be discarded.. 

And its clear what must be done. We are not like Greece, at least on the national level. We have plenty of options, and precedents, for a solution. The president must immediately give rebirth to the WPA style direct temporary employment of the unemployed. It must be the employer of last resort. If congress cannot be persuaded to get out of gridlock, then executive action must empower some existing national and state institutions to be re-purposed to manage this critical national security task.

You cannot cure unemployment or the national debt with layoffs.

Concurrent with the bad news on jobs, we approach ever closer the deadline for raising the debt-ceiling. The president has made a dramatic “Grand Solution” He offers the unthinkable to the Republicans – almost an “offer they cannot refuse” –  by “putting-on-the-table”shaving Social Security/Medicare/Medicaid in exchange for recovering fair taxes from the rich. This enables him to claim (through some complicated math that relies on a substantial rise in inflation) $4 trillion in savings over a 10 year period – double the republican proposals for another million layoffs plus no taxes for the rich. 

From a sophisticated political angle, its a brilliant proposal. If the Republicans agree, it punts the whole debt hysteria debate past the 2012 election! Since the death of OBL, Obama has pretty much closed the book on attacks from the Right on foreign policy. So what would be left for Republicans to run on? – not much!  

On the other hand, if the Republicans do not agree, and force a debt-ceiling showdown no sane Republican claims to want, they will be blamed for the disaster that follows.

I applaud the president for being smarter and more grown up than his adversaries.  But if focus on the fundamentals is lost, sophistication and applause will win nothing but salt and bitterness, chaos and poverty. It is time to "pivot" back to addressing unemployment.

Photo by Seattle Municipal Archives/cc by 2.0/Flickr

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