The Wonk Room

Unemployment Hits 14-Year High, U.S. Economy Has Shed 1.2 Million Jobs In 2008»

According to data released today by the Department of Labor, the U.S. unemployment rate is at a 14-year high of 6.5 percent. In October, “employers shed another 240,000 jobs…the 10th consecutive monthly decline and a clear signal that an accelerating slowdown is assailing households and businesses.”

The job loss was even worse than economists had predicted. In total, the U.S. economy has seen 1.2 million jobs disappear this year.

As the Center for American Progress’ Christian Weller wrote, “The deepening labor market contraction that followed years of slow job growth requires both a short-term response to keep job losses from spiraling downward and a long-term policy response that will allow American families to recover their income losses.”

Here are some steps that can be taken:

- Extend unemployment benefits, as “many are running out.” CAP’s Michael Ettlinger noted that “the best stimulus proposals can meet the overlapping objectives of boosting demand, stopping job losses, helping those most in need during bad times, and starting to make investments that have long-term benefits. Extending unemployment compensation and measures getting cash into the pockets of people who need it (and will spend it) are examples of stimulus policies.”

- Implement a green recovery and infrastructure investment program, which - by making a wide range of investments that efficiently produce jobs and move the country toward a low-carbon economy - can “create 2 million new jobs nationwide over two years.”

Either of these measures can be included in an economic stimulus package, which is needed to boost the struggling economy anyway. An extension of unemployment benefits has already gained the support of Rep. Nancy Pelosi (D-CA) and President-elect Barack Obama.

‘Vital First Steps’: Extending Unemployment Benefits»

Today, Bloomberg reported that Congress may be taking up a stimulus bill in a lame-duck session following today’s election, and that “lawmakers are facing growing calls for a measure that would dwarf the $168 billion economic stimulus package signed into law in February.”

The size of the stimulus bill is the subject of serious debate, with economists saying anywhere from $300 billion to $500 billion may be necessary “to prevent a deepening recession.” Goldman Sachs economists said that the measure should equal $500 billion “in order to offset a big slowdown in consumer and business spending.”

The Wonk Room has been arguing that the stimulus should be aimed at infrastructure projects, which - as Paul Krugman noted - “the country badly needs in any case.” However, there is another key facet that the stimulus bill should address: unemployment benefits. The U.S. unemployment rate was 6.1 percent in September. As former Secretary of Labor Robert Reich noted:

More than 1 in every 5 people out of work have been looking for six months or more. And many are running out of unemployment benefits. The National Employment Law Project estimates nearly 800,000 will run out this month. And another 350,000 in November and December. That means they won’t be able to pay their bills, including their mortgages. Already this year, almost half of mortgage delinquencies have been caused by homeowners’ lacking of income or employment.

This idea has already garnered opposition from conservatives in Congress. As CNN Money reported today, House conservatives are against extending unemployment benefits:

Mike Steel, an aide to House Minority Leader John Boehner, R-Ohio, said the Republicans would prefer to pass a stimulus bill that didn’t include extensions in unemployment benefits, food stamps and infrastructure projects, arguing they take too long to effectively boost the economy.

Boehner and other conservatives are incorrect if they believe extending unemployment benefits will not quickly boost spending. As the Center for American Progress has noted, “the immediate macroeconomic benefit of putting more money in the pockets of unemployed Americans looking for work is reason enough to extend benefits. This is stimulus money that will swiftly and assuredly flow back into the economy.”

As CAP’s Michael Ettlinger wrote, “moves to help the unemployed and those who are being hit hardest by the deteriorating situation should be included” in a stimulus package, as they are the “vital first steps to getting our economy stabilized and providing stimulus to stop the bleeding.”

McCain’s Series Of Flaccid Stimulus Proposals»

Today, Sen. John McCain (R-AZ) held a roundtable with some of his economic advisers, including former Governor Mitt Romney, former eBay CEO Meg Whitman, Gov. Tim Pawlenty (R-MN), and former Housing Secretary Jack Kemp.

In a statement following the roundtable, McCain ripped the idea of an economic stimulus package, calling it a “$300 billion spending spree,” and said “I would rather give the great American middle class additional tax cuts and let you keep that money and invest it in your future.” Watch it:

McCain has been consistently cold to the idea of an economic stimulus package, saying various other proposals are better for energizing the economy. Last week, the campaign released a statement saying “we do not believe that a national crisis should be taken as a license for wasteful spending or earmarked projects,” and advocating McCain’s American Homeownership Resurgence Plan as “the best kind of stimulus.”

McCain economic adviser Douglas Holtz-Eakin said on CBS’s Face the Nation yesterday that “keeping American households spending” is “the greatest stimulus of all“:

[T]he idea that somehow tough economic times are license to spend money on anything you can think of is something you want to look at very carefully. […] There is no greater stimulus than keeping American households spending. They’re 70 percent of the economy. And so focusing on them, keeping them in jobs, creating new jobs, that’s the greatest stimulus of all.

However, there is a growing consensus towards an economic stimulus package aimed at infrastructure investment. The proposal has been endorsed by myriad economists and budget analysts, including Nobel Prize winner Paul Krugman and Fed Chairman Ben Bernanke. In fact, Robert Bixby of the Concord Coalition - which McCain said he would rely on for economic policy advice - recently said that “it’s appropriate…to loosen fiscal policy, so long as it is done on a targeted and temporary basis.”

Furthermore, it is odd that McCain is touting tax cuts for “the great American middle class” as an adequate stimulus package, since his economic plan gives no benefit to over 100 million middle class households. And his job creation plan doesn’t even keep pace with new workers entering the workforce, so it’s difficult to see how it would provide any economic stimulus.

As Krugman noted, “there’s a lot the federal government can do for the economy.” Relying on tax cuts and an ineffective job creation plan is not enough.

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Palin’s Policies That Are ‘Great For The Middle Class’: Cutting Corporate Taxes and Earmarks»

Yesterday, during an interview with NBC’s affiliate in Tampa Bay, Gov. Sarah Palin (R-AK) was asked which economic policies she and Sen. John McCain (R-AZ) support that would be “great for the middle class.” The policies that Palin cited included a corporate tax cut and earmark reform, neither of which do much of anything for the middle class. Watch it:

To her credit, Palin answered this question better than McCain campaign surrogate Carly Fiorina, who was only able to come up with “drill, drill, drill” when asked about McCain’s middle class tax cut. Still, Palin put forth one policy that benefits corporations and another that has nothing to do with middle class taxpayers at all.

As the Wonk Room has noted time and again, the McCain/Palin proposal to cut the corporate tax rate from 35% to 25% gives $175 billion to America’s corporations, while not creating any jobs, which is the campaign’s justification for the cut. Palin also repeated the campaign’s false claim that the U.S. corporate tax rate is the “second-highest in the world.”

As for earmark reform, it’s hard to see how cutting earmarks benefits the middle class. Accordng to USA Today, “eliminating every congressional earmark in the federal budget would save an estimated $18 billion a year.” And as Matthew Yglesias noted, “normally an earmark will be for something popular that you’re proud to claim credit for,” such as food banks, schools, and medical centers.

Palin is using earmarks and corporate tax cuts to distract from the fact that the McCain/Palin economic plan includes nothing for the middle class. 100 million middle class households receive no benefit from McCain’s tax plan, and some middle-class households could actually see a tax increase if McCain’s health care plan is enacted. In the end, the McCain/Palin economic vision is not “great” for the middle class at all.

The Palin/McCain Job Plan Cuts Corporate Taxes And Doesn’t Create Jobs»

During the Vice-Presidential debate last night, Gov. Sarah Palin (R-AK) spent ample time claiming that Sen. John McCain’s (R-AZ) economic plan will create new jobs and cause the economy to grow:

PALIN: We can speak in agreement here that darn right we need tax relief for Americans so that jobs can be created here…We do need the private sector to be able to keep more of what we earn and produce. […]

You’re going to have a choice in just a few weeks here on either supporting a ticket that wants to create jobs and bolster our economy and win the war or you’re going to be supporting a ticket that wants to increase taxes, which ultimately kills jobs, and is going to hurt our economy.

The McCain/Palin economic plan consists of a cut in the corporate tax rate, a permanent research and development tax credit, and a provision allowing full expensing of business equipment, which they claim “focuses on how to help our economy create more good jobs.”

This plan, however, spends hundreds of billions of dollars, while not even creating enough jobs to keep up with the number of new workers entering the workforce.

In an analysis for the Center for American Progress Action Fund, Brian Levine finds that McCain’s plan “would create only about ƒƒ450,000 jobs in 2009, at a cost of $280 billion.” Meanwhile, “the United States needs to generate 1.5 million jobs a year just to keep up with the new ƒƒworkers entering the labor force.”

Furthermore, Levine notes that “the number of jobs created would be decidedly unimpressive relative to the size of the tax break given to corporations.” By cutting the corporate tax rate from 35% to 25%, McCain and Palin will be giving $175 billion in tax breaks to America’s corporations, including $45 billion to the Fortune 200. And as the Congressional Budget Office has pointed out, a corporate tax cut “does not create an incentive for [corporations] to spend more on labor.”

Today, it was announced that employers cut 159,000 jobs in September, and the unemployment rate did not drop from its seven-year high of 6.1%. Thus, a plan that actually creates jobs is vital, and as Levine concludes, “a well-designed economic stimulus plan, costing the same amount [as McCain’s plan], would create 2 million jobs.” The McCain/Palin plan, simply put, costs a lot while doing nowhere near enough.

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CNN Posts ‘Fact’ About McCain’s Lie That His Corporate Tax Cuts Will Create Jobs»

Appearing on CNN’s post-debate coverage is a graphic with the text:

FACT: McCain says he would lower business taxes in order to encourage job growth.

McCain did say during the debates, “I want to cut that business tax. I want to cut it so that businesses will remain in — in the United States of America and create jobs.”

But the real fact is this: according to the Congressional Budget Office, a corporate tax cut “does not create an incentive for [corporations] to spend more on labor” and “is not a particularly cost-effective method of stimulating business spending.” And McCain opposes eliminating the tax loopholes that encourage companies to send jobs overseas.

CNN should have indicated it was posting a “fact” about a “lie.” Is that a lact? A flie?

McCain’s Proposal To Create Jobs: An Ineffective Cut On Corporate Tax Rate»

In his acceptance speech last night before the Republican National Convention, Sen. John McCain (R-AZ) set forth a tax proposal that he claimed “will create jobs“:

Keeping taxes low helps small businesses grow and create new jobs. Cutting the second highest business tax rate in the world will help American companies compete and keep jobs from moving overseas

A job-creating economic plan is supremely important now that the Bureau of Labor Statistics has released new numbers showing that unemployment is at a five-year high of 6.1%. Last week alone, “the number of U.S. workers filing new claims for jobless benefits jumped by 15,000.”

But if McCain wants to create jobs, cutting the corporate tax rate isn’t the place to start. According to the Congressional Budget Office, a corporate tax cut “does not create an incentive for [corporations] to spend more on labor” and “is not a particularly cost-effective method of stimulating business spending.”

As the Wonk Room has previously shown, cutting the corporate rate (which is only the world’s second highest on paper) would just lower America’s already below average corporate tax revenue. The Center for Economic & Policy Research co-director Dean Baker has said that “it doesn’t make any sense” to say that corporate tax rates are strangling the economy.

McCain, though, has thrown his chips in with the Bush economic philosophy, which has left the working and middle class behind. In fact, as McCain accepted his nomination, news headlines screamed of what Wonkette called an “economic collapse“: payrolls and stocks down, foreclosures and credit-market writedowns up.

Job growth in the eight years before Bush came to office was significantly better than in the eight years since. But to McCain, the Bush-Norquist agenda of tax cuts for corporations takes precedence over anything aimed at the anyone else.

Which Eight Years Did McCain Prefer?»

The Bureau of Labor Statistics has released its monthly employment data, and the picture is bleak: the American economy lost 84,000 jobs in August, and the employment rate jumped to 6.1%, the highest in five years.

While productivity is up 4.3% since last year (people are working harder with better, more efficient technology), real wages have sagged, dropping .4%.

These numbers are a continuation of trends resulting from the policies of George W. Bush: when times are good, they’re only good for corporations and the wealthy, and when times are bad, they’re mostly bad for the middle class.

Take a look at the comparison in job growth from Bush’s presidency to the eight years before George W. Bush:

Unfortunately, John McCain plans to continue George W. Bush’s failed economic policies. Today, in response to the new job numbers, McCain’s campaign said “Americans are hurting and we must act to create jobs.”

They’re right, but that’s not what John McCain’s Bush-style economic plan would do.

More »

Unemployment At Highest Level In 4 Years»

The Labor Department reported today that the “U.S. unemployment rate rose to the highest level in more than four years.” According to the data, “the unemployment rate rose to 5.7 percent,” total employment “fell by about 72,000 jobs and unemployment rose by 285,000.” The average hourly earnings rose by just 0.3% to $18.06 per hour, “far behind inflation.” Bloomberg reports:

The last time the unemployment rate climbed so much in four months was in 2001, when the U.S. was last in a recession. Job losses have combined with decreasing property values, stricter lending rules and near-record energy prices to send consumer confidence levels close to the weakest in 16 years in July.

In light of the new data, economists predicted that “the labor market is likely to remain weak, if not deteriorate a bit further.” Indeed, from year to year, unemployment has increased, suggesting that the economy “is in a recession, probably a shallow recession“:

As the middle class continues to struggle from “the weakest job growth since the Great Depression, flat wages, and declining benefits,” corporate profits are at an all time high. Unfortunately, Sen. John McCain (R-AZ) only seeks to add to corporate profit, arguing that cutting corporate taxes by $175 billion will make American corporations more competitive and help American workers. But today’s job figures make it abundantly clear that corporate gains are not trickling down to workers. What’s needed is a stimulus for the middle class, not a tax cut that will go towards corporate profit.

McCain On Track To Repeat Bush’s Dismal Record On Job Creation»

Paul Krugman’s most recent blog post has a great chart highlighting Bush’s dismal record of job creation, comparing it to job creation during the Clinton administration:

According to a study by the non-partisan Congressional Budget Office on policy responses to short-term economic weakness, the focal point of McCain’s plan, a cut in the corporate tax rate, is fundamentally flawed:

The most common form of a general cut in business taxes is a reduction in the corporate tax rate. This approach, however, is not a particularly cost-effective method of stimulating business spending: Increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more, because production depends on the ability to sell output.

So let’s connect the dots. McCain wants to follow Bush’s lead on tax cuts — not only extend them past their 2010 expiration, but deepen them further by cutting the corporate rate from 35 percent down to 25 percent. A cut in the corporate tax rate is not only an inefficient means of creating jobs, but as Krugman and Madland point out, the Bush tax cuts for the wealthy have resulted in embarrassingly low levels of job creation.

So unless John McCain is running against Herbert Hoover in the fall, any competitor will find themselves with greater “emphasis on job creation” than the Maverick from Arizona.

New Job Losses — The Kind McCain Won’t Bring Back»

Today’s Department of Labor monthly employment report shows a 5.1% unemployment rate (an increase of 0.3% from last month) and a loss of 80,000 jobs across the country (a year to date reduction of 288,000).

This month’s figures also highlight a disappointing trend in the kinds of jobs that are being lost: manufacturing jobs. In 2007, only six states — Washington, Utah, Nevada, Kansas, Nebraska and Louisiana — created manufacturing jobs. The bulk of those positions being industry-specific, such as airplane production or transportation. In the more traditional manufacturing, rust belt states — Indiana, Ohio, New York, New Jersey, Pennsylvania, West Virginia, and Michigan — manufacturing employment was either stagnant or declined.

Just before Michigan’s January Republican primary, McCain made his now infamous pronouncement:

I’ve got to give you some straight talk: Some of the jobs that have left the state of Michigan are not coming back… They are not. And I am sorry to tell you that.

Michigan, which has an unemployment rate over 2 percent above the national average, lost 5.3 percent, or 76,500 manufacturing jobs in 2007 — the largest job loss of any state. Michigan’s non-farm economy is comprised of 15 percent manufacturing.

Note to McCain: this is how you get manufacturing jobs back.

Unemployment Soars To Highest Levels Since Katrina»

In a major milestone announcement today, the US Department of Labor revealed that the number of US workers claiming unemployment rose to 407,000 from the previous week, its highest level since Hurricane Katrina in September 2005. The number of people collecting unemployment insurance reached its highest level since July 2004.

More shocking than just the increase is sheer number is the amount by which this figure surpassed economists’ expectations: over 40,000 more Americans are reporting joblessness this week than anticipated. The national monthly unemployment report, which is released tomorrow, is expected to be equally as dismal with an estimated decline of 50,000 American jobs.

Weekly Jobless Claims, via The Capital Spectator:

Reverberating throughout the American economy, this announcement had immediate impact on the strength of the US Dollar, stock index futures, and the increasingly prevalent suspicion that the US is approaching recession.

Less than 24 hours after the Chairman of both the Federal Reserve and US Treasury articulated their pessimistic outlook on the 2008 economy, these numbers unfortunately are simply an indication of what’s to come.