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More Stimulus Badly Needed to Create Jobs
Sep 03, 2010
This
is the worst Labor Day for American labor in decades, maybe since the
Great Depression. Unemployment is at 9.5 percent (as of July), and if we
add in the people involuntarily working part time or who have given up
looking for work, we get 16.5 percent of the labor force. This means
that unemployment plus underemployment has risen by about 14.6 million
people since the recession began.
How bad does it have to get before the
Congress (and the President) decide that we need another stimulus to get
this economy moving? The collapse of home sales in July to the slowest
pace on record was a reminder that the market for housing is likely to
be depressed for years to come. Home prices have another 15 percent to
fall, to get back to pre-bubble trend levels. Add that gloom to the
labor market, and no wonder consumer spending has been weak in this
recovery.
You know things are bad when the
Chairman of the Federal Reserve - trying to calm the markets, as he
attempted last week -- makes a speech to
his fellow central bankers assuring the world that the Fed has more
tools in its toolbox of monetary policies if things get more desperate.
But compared to the elected branches of
our government, the Fed has done a lot to counteract this recession. It
can and should do more - such as raising its targeted rate of inflation
-- but right now we need Congress and the president to act.
Fears of a double-dip recession, which
is a real possibility, are only part of the story. If the economy limps
along at the growth of the last quarter - 1.6 percent - or less, and
therefore job creation does not keep up with the growth of the labor
force, it will still feel like a recession to most Americans. Even
people who are employed will be reluctant to spend because of job
insecurity. And businesses will hold back on investment; business
investment (not including inventories) is still down 15 percent from its
pre-recession peak. The technical definition of recession will not
matter, except to the National Bureau of Economic Research. Employment
is what matters.
Republicans have successfully promoted
the idea that we already tried a stimulus and it didn't help. There are
few, if any, economists who would agree. The non-partisan Congressional
Budget Office estimates that between 1.4 and 3.3 million more people were employed by mid-2010, because of the stimulus.
The problem is that there is no stimulus
any more, as state and local spending cuts outweigh what little impact
remains of federal stimulus on growth. The results of these local budget
cuts can be tragic, as on July 20 in San Diego, when a two-year-old child died after a response from emergency medical services was delayed because of fire department cutbacks.
What is the argument against another
stimulus? Simply that it will add to our national debt. But what is
another few percentage points of debt compared to leaving millions of
Americans unemployed, indefinitely, and the risk of a downward spiral
that could sink the economy even further? It is better to err on the
side of caution - and yes, the side of caution is avoiding the more
serious risks.
A national grass-roots non-profit group called Jobs with Justice is organizing a nationwide effort on
September 15 to pressure Congress to act. It makes sense to me. Maybe
voters should make it a "litmus test" for every Congressional candidate
in November: no new stimulus, no vote. If they don't care enough about
our jobs to make a simple commitment like this, they don't deserve to
have a job either.
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Mark Weisbrot
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research (CEPR), in Washington, DC. He is also president of Just Foreign Policy. His latest book is "Failed: What the "Experts" Got Wrong about the Global Economy" (2015). He is author of co-author, with Dean Baker, of "Social Security: The Phony Crisis" (2001).
This
is the worst Labor Day for American labor in decades, maybe since the
Great Depression. Unemployment is at 9.5 percent (as of July), and if we
add in the people involuntarily working part time or who have given up
looking for work, we get 16.5 percent of the labor force. This means
that unemployment plus underemployment has risen by about 14.6 million
people since the recession began.
How bad does it have to get before the
Congress (and the President) decide that we need another stimulus to get
this economy moving? The collapse of home sales in July to the slowest
pace on record was a reminder that the market for housing is likely to
be depressed for years to come. Home prices have another 15 percent to
fall, to get back to pre-bubble trend levels. Add that gloom to the
labor market, and no wonder consumer spending has been weak in this
recovery.
You know things are bad when the
Chairman of the Federal Reserve - trying to calm the markets, as he
attempted last week -- makes a speech to
his fellow central bankers assuring the world that the Fed has more
tools in its toolbox of monetary policies if things get more desperate.
But compared to the elected branches of
our government, the Fed has done a lot to counteract this recession. It
can and should do more - such as raising its targeted rate of inflation
-- but right now we need Congress and the president to act.
Fears of a double-dip recession, which
is a real possibility, are only part of the story. If the economy limps
along at the growth of the last quarter - 1.6 percent - or less, and
therefore job creation does not keep up with the growth of the labor
force, it will still feel like a recession to most Americans. Even
people who are employed will be reluctant to spend because of job
insecurity. And businesses will hold back on investment; business
investment (not including inventories) is still down 15 percent from its
pre-recession peak. The technical definition of recession will not
matter, except to the National Bureau of Economic Research. Employment
is what matters.
Republicans have successfully promoted
the idea that we already tried a stimulus and it didn't help. There are
few, if any, economists who would agree. The non-partisan Congressional
Budget Office estimates that between 1.4 and 3.3 million more people were employed by mid-2010, because of the stimulus.
The problem is that there is no stimulus
any more, as state and local spending cuts outweigh what little impact
remains of federal stimulus on growth. The results of these local budget
cuts can be tragic, as on July 20 in San Diego, when a two-year-old child died after a response from emergency medical services was delayed because of fire department cutbacks.
What is the argument against another
stimulus? Simply that it will add to our national debt. But what is
another few percentage points of debt compared to leaving millions of
Americans unemployed, indefinitely, and the risk of a downward spiral
that could sink the economy even further? It is better to err on the
side of caution - and yes, the side of caution is avoiding the more
serious risks.
A national grass-roots non-profit group called Jobs with Justice is organizing a nationwide effort on
September 15 to pressure Congress to act. It makes sense to me. Maybe
voters should make it a "litmus test" for every Congressional candidate
in November: no new stimulus, no vote. If they don't care enough about
our jobs to make a simple commitment like this, they don't deserve to
have a job either.
Mark Weisbrot
Mark Weisbrot is Co-Director of the Center for Economic and Policy Research (CEPR), in Washington, DC. He is also president of Just Foreign Policy. His latest book is "Failed: What the "Experts" Got Wrong about the Global Economy" (2015). He is author of co-author, with Dean Baker, of "Social Security: The Phony Crisis" (2001).
This
is the worst Labor Day for American labor in decades, maybe since the
Great Depression. Unemployment is at 9.5 percent (as of July), and if we
add in the people involuntarily working part time or who have given up
looking for work, we get 16.5 percent of the labor force. This means
that unemployment plus underemployment has risen by about 14.6 million
people since the recession began.
How bad does it have to get before the
Congress (and the President) decide that we need another stimulus to get
this economy moving? The collapse of home sales in July to the slowest
pace on record was a reminder that the market for housing is likely to
be depressed for years to come. Home prices have another 15 percent to
fall, to get back to pre-bubble trend levels. Add that gloom to the
labor market, and no wonder consumer spending has been weak in this
recovery.
You know things are bad when the
Chairman of the Federal Reserve - trying to calm the markets, as he
attempted last week -- makes a speech to
his fellow central bankers assuring the world that the Fed has more
tools in its toolbox of monetary policies if things get more desperate.
But compared to the elected branches of
our government, the Fed has done a lot to counteract this recession. It
can and should do more - such as raising its targeted rate of inflation
-- but right now we need Congress and the president to act.
Fears of a double-dip recession, which
is a real possibility, are only part of the story. If the economy limps
along at the growth of the last quarter - 1.6 percent - or less, and
therefore job creation does not keep up with the growth of the labor
force, it will still feel like a recession to most Americans. Even
people who are employed will be reluctant to spend because of job
insecurity. And businesses will hold back on investment; business
investment (not including inventories) is still down 15 percent from its
pre-recession peak. The technical definition of recession will not
matter, except to the National Bureau of Economic Research. Employment
is what matters.
Republicans have successfully promoted
the idea that we already tried a stimulus and it didn't help. There are
few, if any, economists who would agree. The non-partisan Congressional
Budget Office estimates that between 1.4 and 3.3 million more people were employed by mid-2010, because of the stimulus.
The problem is that there is no stimulus
any more, as state and local spending cuts outweigh what little impact
remains of federal stimulus on growth. The results of these local budget
cuts can be tragic, as on July 20 in San Diego, when a two-year-old child died after a response from emergency medical services was delayed because of fire department cutbacks.
What is the argument against another
stimulus? Simply that it will add to our national debt. But what is
another few percentage points of debt compared to leaving millions of
Americans unemployed, indefinitely, and the risk of a downward spiral
that could sink the economy even further? It is better to err on the
side of caution - and yes, the side of caution is avoiding the more
serious risks.
A national grass-roots non-profit group called Jobs with Justice is organizing a nationwide effort on
September 15 to pressure Congress to act. It makes sense to me. Maybe
voters should make it a "litmus test" for every Congressional candidate
in November: no new stimulus, no vote. If they don't care enough about
our jobs to make a simple commitment like this, they don't deserve to
have a job either.
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