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Specifically, What Should Be Done For Jobs?
In his Saturday radio address, President Obama acknowledged the White House is exploring "additional options to promote job creation.” It's about time. This is the worst job market in seventy years -- including the longest duration of steep job losses.
If anyone had any doubt that something far more dramatic must be done, listen to former Federal Reserve Chairman Alan Greenspan. He warned Sunday against further stimulus because “we are in a recovery, and I think it would be a mistake to say the September numbers alter that significantly.” Greenspan has turned into an inverse soothsayer. After his cataclysmic error about where the economy was headed before the meltdown, his views about the future should be carefully noted as being the exact opposite of what's likely to be in store.
The economy may be in a technical recovery but this is not a real recovery and the "green shoots" or "positive signs" that Wall Street cheerleaders love to shout about are phantoms of their ever-optimistic imaginations. The stimulus is working but it is far from adequate. Before the stimulus, we were losing more than 500,000 jobs a month. Now that 40 percent of the stimulus has been spent, we are losing more than 250,000 jobs a month.
What to do? With the debt ceiling approaching and the gravitational pull of the 2010 elections increasing, the White House can't go back to Congress with a formal bill to enlarge the stimulus package. Four simpler moves would be to:
(1) Use existing authority under both the stimulus package enacted earlier this year and the nefarious TARP bailout fund -- extending and combining them into a fund to make up for state and local cuts in public school budgets, childrens' health, public health (we need workers to administer swine flu vaccine) and public transportation. Instead of bailing out banks and giant automakers, we should switch to bailing out public services that average people need.
(2) Propose a one-year payroll tax holiday on the first $20,000 of income. Republicans as well as Blue Dog Dems could go along with this, and it would be a highly progressive tax cut since 80 percent of Americans pay more in payroll taxes than they do in income taxes.
(3) Give small businesses a "new jobs tax credit" for every net new job created over the next year. Granted, under normal circumstances this sort of jobs credit doesn't have much effect, and it's difficult to separate hires that would have happened anyway from net new ones. But we're not in normal circumstances; small businesses, which are responsible for most new jobs, still aren't hiring. They need a boost.
(4) Dramatically expand the Small Business Administration's lending programs and have the Fed buy up the SBA's debt. Big banks are not lending to small businesses. TARP has been an utter failure in this regard. The SBA and the Fed should circumvent them and help small businesses get the capital they need, so they can start hiring again.
The politics of these four steps aren't difficult. It would be hard to get a new stimulus package through Congress, but no member who's up for reelection next year when unemployment is likely to be in double digits wants to be accused by rivals of voting against steps to help small businesses, public schools, childrens' health, and average working people who need a tax cut.
If anyone had any doubt that something far more dramatic must be done, listen to former Federal Reserve Chairman Alan Greenspan. He warned Sunday against further stimulus because “we are in a recovery, and I think it would be a mistake to say the September numbers alter that significantly.” Greenspan has turned into an inverse soothsayer. After his cataclysmic error about where the economy was headed before the meltdown, his views about the future should be carefully noted as being the exact opposite of what's likely to be in store.
The economy may be in a technical recovery but this is not a real recovery and the "green shoots" or "positive signs" that Wall Street cheerleaders love to shout about are phantoms of their ever-optimistic imaginations. The stimulus is working but it is far from adequate. Before the stimulus, we were losing more than 500,000 jobs a month. Now that 40 percent of the stimulus has been spent, we are losing more than 250,000 jobs a month.
What to do? With the debt ceiling approaching and the gravitational pull of the 2010 elections increasing, the White House can't go back to Congress with a formal bill to enlarge the stimulus package. Four simpler moves would be to:
(1) Use existing authority under both the stimulus package enacted earlier this year and the nefarious TARP bailout fund -- extending and combining them into a fund to make up for state and local cuts in public school budgets, childrens' health, public health (we need workers to administer swine flu vaccine) and public transportation. Instead of bailing out banks and giant automakers, we should switch to bailing out public services that average people need.
(2) Propose a one-year payroll tax holiday on the first $20,000 of income. Republicans as well as Blue Dog Dems could go along with this, and it would be a highly progressive tax cut since 80 percent of Americans pay more in payroll taxes than they do in income taxes.
(3) Give small businesses a "new jobs tax credit" for every net new job created over the next year. Granted, under normal circumstances this sort of jobs credit doesn't have much effect, and it's difficult to separate hires that would have happened anyway from net new ones. But we're not in normal circumstances; small businesses, which are responsible for most new jobs, still aren't hiring. They need a boost.
(4) Dramatically expand the Small Business Administration's lending programs and have the Fed buy up the SBA's debt. Big banks are not lending to small businesses. TARP has been an utter failure in this regard. The SBA and the Fed should circumvent them and help small businesses get the capital they need, so they can start hiring again.
The politics of these four steps aren't difficult. It would be hard to get a new stimulus package through Congress, but no member who's up for reelection next year when unemployment is likely to be in double digits wants to be accused by rivals of voting against steps to help small businesses, public schools, childrens' health, and average working people who need a tax cut.
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Give small businesses a "new jobs tax credit"
How about an "old jobs" tax credit? In other words, pay businesses not to lay people off, or to hire back people who were recently let go. This will save us a lot of money in unemployment benefits and other entitlement spending, so it seems worth the tax break.
October 5, 2009 1:31 PM | Reply | Permalink
Has 40 percent been spent, or merely allocated? I still have the impression that the actual spending is under 25%.
October 5, 2009 1:32 PM | Reply | Permalink
Secretary Reich, and I call you that because that made you ex officio a Trustee of Social Security, with all respect this is one of the stupidest suggestions I ever heard.
"(2) Propose a one-year payroll tax holiday on the first $20,000 of income. "
As you must be aware actual Social Security income from payroll tax and tax on benefits will barely cover outlays in OAS this year, while DI went cash flow negative in 2006. The two Trust Funds still show surpluses simply because of interest accrued on the Special Treasuries, but this interest has not come in the form of cash, but instead in the form of more Special Treasuries. Now these Special Treasuries are backed by Full Faith and Credit of the U.S. but can only be redeemed in cash by the Treasury doing borrowing in the public markets dollar for dollar.
What this means is that every 95%+ of every payroll tax dollar that comes in the door goes out immediately out in the form of benefits. Which means that every dollar not collected because of a tax holiday has to be replaced by a dollar of public borrowing and has the effect of flatlining the growth of the Trust Fund and so making a phony Social Security crisis into a real one.
Every time I hear of a 'temporary' payroll tax holiday I want to tear my hair out. The reason they are embraced by Blue Dogs and Republicans is because they make it easier to achieve their long term goal of rolling back the New Deal by 'proving' Social Security is a 'failure'.
Social Security is not a regressive tax, not when you consider the system as a whole. And Social Security was designed specifically NOT to be a welfare system lest it gets caught up in exactly the kind of proposals you are putting forth here.
Leave Social Security alone. It is worker insurance paid entirely by workers for workers. It demands nothing from capital and so owes nothing to capital. No one gets a free ride although there is a mild transfer from the middle class to the working class (because most people making $102,000 or less know they could easily have ended up closer to the bottom).
Under your proposal would workers still get credit for these dollars not withheld? Or would their future retirement simply be permanently reduced? These proposals always seem easy. Regressive carbon tax? Reduce payroll tax to compensate. Regressive flat tax? Reduce payroll tax to compensate. But each and every proposal has the effect, and often the intent, of defunding Social Security and transforming it from insurance to welfare.
Mr. Secretary do you have trouble sleeping at night? It is probably the ghost of Frances Perkins haunting you for even thinking about helping those who would kill her brainchild.
October 5, 2009 1:51 PM | Reply | Permalink
Specifically? Resurrect Black-Connery.
"A BILL To prevent the shipment in interstate commerce of certain articles and commodities, in connection with which persons are employed more than five days per week or six hours per day, and prescribing certain conditions with respect to purchases and loans by the United States, and codes, agreements, and licenses under the National Industrial Recovery Act.
"Whereas interstate commerce among the people of the various States has been and is now burdened, hampered, and clogged by a patent and continued idleness of workers as well as the mechanical appliances and implements of production; and
"Whereas this continued idleness of men and machines has necessarily resulted in imposing the burden of feeding and supporting more than eighteen million people upon that part of our people who do work and produce, which condition is unjust to those who work and those who cannot obtain work; and
"Whereas interstate commerce and trade can best be revived, and the comfort and happiness of the people can best be produced by an economic readjustment that supplies people jobs with wages, rather than charity without jobs; and
"Whereas under our economic system production is stifled when purchasers with ability to buy are lacking, and is stimulated to action by purchasers with money; and
"Whereas our private productive system is dependent for its own customers chiefly upon its own employees, who cannot buy the output of the system unless producers give them jobs at wages adequate to exchange for the products; and Whereas private business has not been able, and is not now able, to give jobs to those who need them, on past or existing hours of labor; and
"Whereas business chaos, bankruptcies, insolvencies, misery, destitution, and want have resulted, and the American people have been deprived of the incalculable advantages and benefits of the abundance of goods, commodities, and services idle machines and idle people could have produced if put to work: Now, therefore, in order to provide a fairer and more nearly balanced income; to put idle machines and people to work; to increase the purchasing power of the people and thereby stimulate production to capacity; to revive languishing commerce and trade; and to promote the happiness and comfort of the people.
"Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled, That no article or commodity shall be shipped, transported, or delivered in interstate or foreign commerce, which was produced or manufactured in any mine, quarry, mill, cannery, workshop, factory, or manufacturing establishment situated in the United States, in which any person, except officers, executives, and superintendents, and their personal and immediate clerical assistants, was employed more than five days in any week or more than six hours in any day:
October 5, 2009 2:01 PM | Reply | Permalink
Today, I would suggest something more along the lines of a four-day week and a seven-hour day. Or, more flexibly, a 1200-hour annual cap on hours with the details to be negotiated between employer and employee (and not dictated by employers).
Are we not Keynes's "grandchildren"?
People remember that Keynes said in the long run we're all dead. But they forget that he also argued that in the long run "stimulus" programs would lose their effectiveness and that then there would need to be a policy switch to income redistribution and hours reduction to maintain full employment.
So the "Keynesian stimulus" crowd go against what Keynes actually wrote about government deficit spending. As Keynes biographer Robert Skidelsky wrote, "Down with Keynesianism, and up with Keynes!"
October 5, 2009 2:35 PM | Reply | Permalink
Could someone please either revise the mainstream economics definition of "recession" or figure out some other word for "rotten economic conditions"? Announcing the end of a recession as soon as things stop getting worse (which is pretty much what NBER does) is like announcing that a gunshot victim is all better as soon as you've sewed the major arteries back together. The rotten economic conditions, which are what people actually care about, aren't over until unemployment has gone back down, GDP has (at least) surpassed the pre-recession peak, and national income ditto.
As for prescriptions, Well, duh. Public services spending is probably most important. Could that small-business tax credit be refundable?
Among other things we're seeing (as we did in 81-82) that chopping spendable money out of the bottom of the economy is the worst of all possibly worlds for employment and economic activity. This is one place where Keynes (multipliers) and Friedman (velocity) pretty much agree, and where almost no one listen to either of them.
October 5, 2009 2:48 PM | Reply | Permalink
As is clear and unmistakeable, at best (if not continued outright lies, deception, retaliation, ecetra) our US Executive, Legislative and Judicial Branches do not make the promised and necessary corrections. I case you reply;
Would and/or does Michael Moore consider you and your comments, writings and/or teachings as a whole somewhat nonesenseical or completely bogus?
Are your comments, writings and presumably teachings as a whole completely bogus, deceptional or completely avoiding the seriousness that would be expected to be noted, considered and spoken about and with the true intent to the resolves, thereof?
October 5, 2009 3:16 PM | Reply | Permalink
First, declare corporations as non-citizens.
Second I would immediately enact and then implement as soon as practically possible single payer healthcare. The national cost of healthcare is too big a drain on taxpayers and business and inhibits job creation. We can't compete in a global market with this big cost differential hanging over our heads. All our global competition has taken a different route on healthcare cost provisioning. The U.S. Congress and the administration isn't smart enough to figure out we don't have a choice except to do the same.
Next I would totally revert back to the 1998 bank / financial regulatory scheme. It took the unregulated financial marketplace well less than a decade to almost totally destroy the global economy after having deregulated everything. We changed this after it served us just fine for over half a century. Why?
Then I would address our crumbling infrastructure. We have fallen behind the rest of the world in our ability to compete because of inefficient communication, transportation and energy production / distribution. Our infrastructure, built in the post depression era, is beyond its projected lifecycle. In current dolllars the cost to fix this is presently running about $2.5T. But we don't really have a choice.
Disallow any public employee from ever working in any industry that does business with government. And vice versa. People must decide if they will be working for the citizens of this country or for the private sector. You can't do both interchangably as politics change. Whitewashing this conflict of interest has gone on for too long already and has repeatedly harmed the citizens of this country.
No non-citizen will be allowed access to any of our public officials in any private communication of any type, to include electronic communication in any form, except under the accompaniement of a citizen or citizens to assure that citizens views are represented in every instance of said communication with non-citizens. Any and all communications of all government officials are to be declared public execpt for verifiable national security issues. A panel of citizens shall be convened to make the determination of what is and isn't a national security issue. This is to provide assurances that public officials don't hide behind a cloak of national security where it isn't warranted and to prohibit them from conducting the business of the country in ways that are disadvantageous to citizens.
This is a good start.
October 5, 2009 5:00 PM | Reply | Permalink
Gad. This is what comes from giving people a forum that have never met a payroll. Nobody, I repeat, nobody is going to spend $25-50,000 a year for a $3,000(guess) tax credit. Besides, to use a tax credit one must have a profit. That's not likely for the businesses in the most trouble.
Cutting back on the work week is also a non-starter. Employees are not "things" that can be manipulated on a whim.
Lastly, banks aren't lending because people don't want to borrow. The US currently has a toxic atmosphere for business and until that passes, things will not improve.
October 6, 2009 6:03 PM | Reply | Permalink
"Gad. This is what comes from giving people a forum that have never met a payroll...
"Cutting back on the work week is also a non-starter. Employees are not "things" that can be manipulated on a whim."
The above claim vividly illustrates the analysis (Marx, Steward, Chapman) that, left to their own devices, employers will be driven by competition to extend the working period beyond its social and physiological/psychological optimum. "We can't!" means "we won't." General overwork lowers the average quality of labor-power available on the market and thus drives up the relative price of energetic, fully-qualified workers. This is what economists currently mistake as a skills "premium". It's functionally a skills penalty. The widening pay gap and mass unemployment at the lower end of the spectrum creates a collapse in demand for the products of industry.
Which is precisely why hours of work have to be regulated and progressively adjusted downward. They can't be left up to the infinite myopic wisdom of those who have "met a payroll" and who, with one eye firmly on the bottom line, behave as though employees are nothing other than "'things' that can be manipulated on a whim."
October 7, 2009 11:06 AM | Reply | Permalink