The Wonk Room

Democrats Considering Direct Jobs Program — Will Deficit Fearmongering Prevent It?

Ryan Grim at the Huffington Post reported today that “as desperate Democratic lawmakers cast about for ways to create jobs from Capitol Hill, a 1970s-era jobs program is getting a fresh look”:

Known as CETA — the Comprehensive Employment and Training Act — the program provided direct government funding to hire temporary workers. At its peak in 1978, it had created 725,000 public service jobs and shaved roughly one point off the unemployment figure…The version of CETA being discussed by Democrats would be some type of public-private partnership through which the government would pay part of an employee’s salary, while he or she would train under and work for a private firm.

Of course, as in most other issues, Republicans automatically voiced their displeasure with the idea, as Michael Steel, a spokesman for Minority Leader John Boehner (R-OH) “gave CETA the instant thumbs down.”

While I would prefer a straight, WPA-style program (both for efficiency and accountability purposes), instead of a public-private partnership, it’s encouraging to see that Congress is finally willing to put such a plan on the table, albeit far later than it should have. There’s no reason that direct job creation — particularly for young people — has been avoided for so long.

However, the Wall Street Journal reported this morning that the administration is “lukewarm about proposals by congressional Democrats to introduce broad legislation to create jobs, instead favoring targeted measures that would be less likely to inflate the deficit.” “Hamstrung by the nation’s $1.4 trillion deficit and his pledge not to raise taxes on middle-class Americans, Mr. Obama is keen to avoid any measures suggestive of a second, big-ticket stimulus,” the Journal said.

As Paul Krugman noted today, deficit hysteria amounts to “scaring the government into inaction on unemployment.” That, combined with Republican insistence that repealing the stimulus is a sound jobs policy, are going to make serious job-creation proposals difficult to engineer. But as former Federal Reserve Vice Chairman Alan Blinder wrote:

Direct public-service employment is straightforward. As long as the new government jobs do not compete with the private sector, the net job creation should be one-for-one. So hire people to repair parks, not shopping malls. And if we restrict ourselves to low-wage jobs, the cost will not do grievous harm to the budget. For example, at an average all-in cost of $30,000 a year, one million new jobs would cost $30 billion.

As James Galbraith noted, in the absence of additional steps (including fiscal aid to states, which are seeing tax revenues plummet) “double-digit joblessness will linger on, breeding frustration and anger — perhaps all the way through to the mid-term elections.”

Of course, much like the brouhaha over stimulus accounting errors, a direct-jobs program opens its advocates up to criticism when, as Dean Baker put it “reporters inevitably find some chump claiming to be employing his brother while splitting the government paycheck.” Does that making taking such a step not worth it? I don’t think so.

Is Work Sharing A Viable Solution To The Unemployment Problem?

As the unemployment rate stubbornly refuses to come down, Congress has rightfully begun looking at ways to spur job creation or, if nothing else, prevent further job loss. One of the ideas that has gained a bit of traction is work sharing, or subsidizing employers who reduce workers’ hours (and maintain their pay) instead of laying some of them off:

A bill sponsored by Sen. Jack Reed (D-R.I.) would give unemployment compensation to employees who accept a reduced work schedule to allow their companies to avert layoffs or to hire more employees…Democratic Sens. John Kerry (Mass.), Paul Kirk (Mass.) and Patrick Leahy (Vt.) have signed on as co-sponsors. Reed’s plan calls for up to $600 million for the program, which would last for up to two years.

The Hill noted that “Rhode Island and 16 other states already have their own work share programs, which have saved more than 146,000 jobs this year so far, according to the Labor Department.” According to Reed’s office, “if all 50 states participated in work share programs, between 400,000 and 500,000 jobs a year could be saved.”

The most outspoken advocate of work sharing has been Dean Baker, co-director of the Center for Economic and Policy Research, who pointed out that the process is cheap, simple, and quick:

In principle, the government can go this route to save jobs at a cost of a bit more than $20,000 per job – far less than the cost per job saved through the stimulus package…Approximately 4 million people leave their jobs every month, half involuntarily. We have job growth if we either create more than 4 million jobs or reduce the number of jobs lost below 4 million. If a work share program reduced involuntary job loss by 20 percent, or 400,000 per month, it would have the same effect as adding 400,000 new jobs.

Both Baker and Paul Krugman point to the example of Germany, which has a work sharing program, along with strong labor protections. As Krugman wrote, the measures “didn’t prevent a nasty recession, but Germany got through the recession with remarkably few job losses.” Plus, as Peter Dorman at EconoSpeak noted, work sharing helps preserve human capital, as firms don’t have to re-hire and re-train workers down the line — they just increase their hours back to where they were previously.

All that said, this is still only a B- idea. (Krugman acknowledges this, calling it the “third-best” economic policy available, after committing to moderate inflation to lower interest rates or further fiscal stimulus.) In the absence of stronger stimulus measures, such as aid to states or a direct job program, it will do some good — and it may be the only thing that a deficit-crazed Congress is willing to consider. But it is inefficient, has the potential to be wasteful, and obviously does nothing for those already out of work. Work sharing isn’t terrible, but I’d like to think that we can do better.

How Does Obama Plan To ‘Focus Extensively’ On Cutting The Deficit In 2010?

The Politico reported today that, in his 2010 State of the Union address, President Obama is going to announce a serious focus on deficit reduction:

President Barack Obama plans to announce in next year’s State of the Union address that he wants to focus extensively on cutting the federal deficit in 2010 – and will downplay other new domestic spending beyond jobs programs, according to top aides involved in the planning. The president’s plan, which the officials said was under discussion before this month’s Democratic election setbacks, represents both a practical and a political calculation by this White House.

As Andrew Sullivan wrote, “this classic Politico piece — in as much as it regurgitates almost comically process-oriented Beltway wisdom — fails to mention a few things about Obama’s spending in his first year,” including: the recession, that health care reform is paid for, and that “there’s a big big difference between spending on green and infrastructure investment and slashing taxes or increasing Medicare entitlements.” Chris Hayes added “there’s one big maddening conceptual error at the heart of this piece…which is to confuse relatively substantial pieces of domestic legislation with a spending ‘binge.’”

But if true, what does the administration mean by “focus extensively” on deficits next year? And what will that entail for the domestic agenda? I certainly hope that no one is thinking of making a 1937-style haul back on recovery efforts. Judging by the public statements of Treasury Secretary Tim Geithner and Office of Management and Budget Director Peter Orszag, they aren’t, but if the administration is quaking over the political ramifications of the deficit now, how long until they head in that direction?

This week, we’ve already seen a group of senators threaten to force the U.S. to default on its debt (by refusing to increase the federal debt ceiling), if they don’t get a bi-partisan commission that will be tasked with cutting Social Security and Medicare. This deficit-mania comes despite a stubbornly weak labor market, and at the same time that Congress is insisting that more must be done in terms of job creation.

Of course, there’s nothing wrong with wringing waste from the system, and there are surely some ineffective or duplicative programs in the various federal agencies that can afford to go by the wayside. And if that’s what the administration means, more power to them.

But as Paul Krugman wrote, “conventional wisdom in Washington seems to have congealed around the view that budget deficits preclude any further fiscal stimulus — a view that’s all wrong on the economics, but that doesn’t seem to matter.” It’d be a shame to see the administration turn this particular bit of conventional wisdom into policy that doesn’t provide more support to the job market, and at worst, could choke off economic recovery.

‘Fiscal Peril’: State Budget Crises Could Lead To 900,000 Lost Jobs Next Year

Back during the stimulus debate, one of the items that was pared back in order to get the overall package under an arbitrary $800 billion price tag was fiscal aid to states and local governments. $40 billion that would have gone to help states weather the economic downturn was lopped off of the bill to placate moderate senators.

As it turns out — and as many economists said at the time — this was not a very good idea. A new report from the Pew Center on the States warns of “fiscal peril” in 10 states which, if unaddressed, will hamper the nation’s economic recovery:

These states’ budget troubles can have dramatic consequences for their residents: higher taxes, layoffs or furloughs of state workers, longer waits for public services, more crowded classrooms, higher college tuition and less support for the poor or unemployed. But they also pose challenges for the country as a whole. The 10 states account for more than a third of America’s population and economic output. And actions taken by state governments to balance their budgets — such as tax increases and drastic spending cuts — can slow down the nation’s economic recovery.

“The problems are evident from coast to coast,” said Mark Zandi, chief economist of Moody’s Economy.com. “Without more help to state and local governments, the resulting budget cuts will become a very significant drag on the economy.” The Center on Budget and Policy Priorities estimates that state budget shortfalls could mean that nearly a million jobs to disappear in the next year:

Presuming they will get no more fiscal relief, states will have to take steps to eliminate deficits for state fiscal year 2011 that will likely take nearly a full percentage point off the Gross Domestic Product. That, in turn, could cost the economy 900,000 jobs next year…Deficits for the current state fiscal year, not all of which states have closed, total more than 25 percent of state general fund budgets, making these the largest shortfalls on record.

As Derek Thompson wrote, those protesting more state aid “must recognize what that entails: hundreds of thousands of state employees joining the ranks of unemployment, and unemployment benefits. Q3 was great, but this thing isn’t close to being over.” And these employees are teachers, police officers, and health care workers — not the kind of employees that it’s easy to make do with less of.

The administration announced today that it is planning a “jobs summit” for December, with Obama calling high unemployment one of the administration’s “great challenges.” If the administration is serious about policies aimed at stemming job loss, more aid to states should certainly be on the table.

Unemployment Hits 10 Percent — Are Tax Credits For Homebuyers And Seniors The Best We Can Do?

Back in June, President Obama predicted that the unemployment rate would eventually hit 10 percent before the recession truly ended. Well, here we are.

Today, the Labor Department announced that the unemployment rate has hit a 26-year high of 10.2 percent, after employers shed 190,000 jobs in October. The wider U-6 measure of underemployment also ticked up to 17.5 percent, from 17 percent last month. The Labor Department also revised September’s losses down to 219,000 from 263,000. At the same time that joblessness continues to increase, productivity — output per hour worked — has soared (as employers make do with fewer employees).

Economist Dean Baker said that he did not expect declining unemployment rates until next spring. “We may be looking at very high levels,” Baker said, “barring a policy response, for several years into the future.” So as Brad DeLong asked “if you had told everyone last election day what would happen, economically, in 2009, what policies would they have adopted then to stem this disaster? And why aren’t we implementing those policies now?”

Indeed, there are positive steps that can be taken, now, that would support the labor market. As Matt Yglesias pointed out, we should probably be deploying more aid to state and local governments, to prevent layoffs and keep infrastructure projects up and running. (Let’s not forget that state aid was significantly reduced during negotiations over the stimulus package.) Paul Krugman, for his part, is advocating a WPA-style direct jobs program — “think of it as the stimulus equivalent of getting the middlemen out of the student loan program.”

Instead, as Steven Pearlstein wrote, “what [lawmakers are] proposing to do is to spend a lot of money that they don’t have in ways that won’t work to help too many people who are neither desperate nor deserving.” These ideas take the form of the badly misguided homebuyer tax credit, and the politically brilliant but economically pointless $250 payment to seniors.

Already, the response that we’ve seen from Congress has been fearmongering about deficits or using the unemployment rate as a nonsensical reason to kill health care reform. Neither of those provide much hope for some productive policy emerging. But if nothing is done, it’s going to be a long, painful slog back to a positive employment situation.

Half Of All U.S. Workers Are Women — Can Policy Adapt To The New Reality?

Today, for the first time in American history, half of all U.S. workers are women and mothers are the primary breadwinners or co-breadwinners in nearly two-thirds of American families. As recently as 1969, women made up only one-third of the workforce, marking just how much of a shift has occurred in the last few decades.

Last year, only one in five families with children (20.7 percent) consisted a traditional male breadwinner with a female homemaker, compared to 44.7 percent in 1975. And the current recession has only accelerated this workforce transformation, as men have lost three out of four jobs since it began in December 2007.

These changes have important ramifications for U.S. economic policy going forward — not that we’ve done much so far to acknowledge them. To that end, the Center for American Progress, in partnership with Californa First Lady Maria Shriver, released The Shriver Report: A Woman’s Nation Changes Everything. The report looks at the changing American workforce, and how policy can adapt to the new economic reality. “Institutions need to adapt to who the American family is today,” Shriver said on Meet The Press yesterday. “They need to get smarter. They need to get more progressive.”

First up, of course, is getting the pay gap under control. Women still make just 77 cents on the dollar compared to their male colleagues, which over the course of a career, will deprive a woman of $434,000 in lifetime earnings. With women more often becoming the primary breadwinner, this poses an obvious problem. The Paycheck Fairness Act, which prohibits retaliation against employees who actively seek knowledge regarding the pay rates of their coworkers, could help in this area.

But the problems don’t end there. As Ann O’Leary and Karen Kornbluh wrote “nearly all of our government policies—from our basic labor standards to our social insurance system—are still rooted in the fundamental assumption that families typically rely on a single breadwinner.” For instance, the U.S. is the only industrialized country without any requirement that employers provide paid family leave, while many employer-sponsored benefits are not designed with pregnancy or caregiving in mind.

Kornbluh and O’Leary advocated updating America’s social insurance policies (like expanding the percentage of the workforce covered by the Family and Medical Leave Act), and increasing support to families for child care, early education and elder care. “All families need real support when there is no longer a wife at home to provide these services free of charge. And our government should not stop at solving the child care crisis: Families also need real support and aid in providing elder care,” they wrote.

Read more about The Shriver Report: A Woman’s Nation Changes Everything in today’s Progress Report.

Fox News Adopts The GOP Mantra: ‘Where Are The Jobs?’

Earlier this month, White House Communications Director Anita Dunn commented that Fox News is “opinion journalism masquerading as news.” She then defended those remarks on CNN’s Reliable Sources, saying that “the reality of it is that Fox News often operates as either the research arm or the communications arm of the Republican Party. And it’s not ideological.” “What I think is fair to say about Fox is — and certainly the way we view it — is that it really is more of a wing of the Republican Party,” Dunn added.

Of course, the network has pushed back on Dunn’s assertions, arguing that “its news hours — 9 a.m. to 4 p.m. and 6 to 8 p.m. on weekdays — are objective.” Fox Political Analyst Brit Hume added that “if Fox News really were a GOP mouthpiece, the White House would not be attacking it.”

However, Fox’s “objective” news hosts have also, quite literally, been GOP mouthpieces on the issue of the economic stimulus package and job creation. In July, House Republicans took to the floor to repeat the mantra “where are the jobs?” And Fox’s anchors, led by America’s Newsroom co-host Bill Hemmer, have adopted the phrase as their own, repeating it over and over on their news shows (on both Fox News and the Fox Business Network). Watch a compilation:

While asking the question again and again, Fox hasn’t seemed interested in finding the answer. After all, officials in many states — including North Carolina, Alabama, California, Idaho and Ohio — have been steadily reporting the number of jobs they’ve created. And today, a new report from the Recovery Accountability and Transparency Board, which oversees the stimulus implementation, stated that “about 30,000 jobs have been directly created or saved by contractors who received money from the federal stimulus program.”

Thus far, Fox contributor Juan Williams seems to be the only one acknowledging the truth, saying that Fox consists of “conservative audience-oriented programming. And I don’t think anybody is going to debate that.”

Bartlett Schools Kudlow: Tax Cuts Would Have Done No Good Whatsoever For Our Economic Problems

When reports emerged that the Obama administration was looking at additional spending measures to spur job creation in the wake of September’s employment report, Republicans immediately claimed that the administration was simply “preparing to push for more of the same flawed tax-and-spend policies,” while advocating yet another variation of its standard collection of tax cuts.

But Bruce Bartlett — former economic adviser to President Reagan and a Treasury Official under President Bush Sr. — hasn’t gone down that road and thinks that the Republican party “no longer has a credible economic policy.” He’s particularly put off that the party “continues to advocate tax cuts even though the recent Bush tax cuts led to only mediocre economic growth and huge deficits.”

“So much of what passes for conservatism today is just pure partisan opposition,” Bartlett has said. “What remains is a caricature — that there is no problem that more and bigger tax cuts won’t solve.” And when CNBC’s supply-side ideologue Larry Kudlow (a former Reagan official himself) asked Bartlett whether tax cuts would have been preferable to stimulus spending, Bartlett replied with this:

I don’t think tax cuts would have done any good whatsoever for the current economic problems that we have today. The problem is workers don’t have incomes to tax, because they’re unemployed, corporations don’t have profits to tax, because they’re losing money, and investors are sitting on huge capital losses, not capital gains…I think that today we have the same set of problems that we had in the 1930’s with a lack of demand, and we need to get monetary policy mobilized and that requires spending in the economy to increase and that’s what will get us out of the crisis.

Watch it:

Bartlett certainly befuddled Kudlow, who could only say “I don’t understand your analysis…What is it you’re saying here?”

But Bartlett is absolutely right — private spending has collapsed, consumers are saving more than ever, and government is the only entity available to fill the output gap, or the difference between what the U.S. is able to produce and what it’s able to sell. And with unemployment still creeping upward (and the underemployment rate at 17 percent), its becoming clearer that current spending still may not be filling that gap.

According to a new Economic Policy Institute-Hart Research poll, 71 percent of Americans support putting unemployed people back to work at government-funded public service jobs that help meet community needs (the number actually rises to 74 percent when the example of President Franklin Roosevelt’s Civilian Conservation Corps is invoked). With so many idle resources, it simply makes sense for them to be employed in a useful manner, a notion which Bartlett accepts, much to Kudlow’s chagrin.

Of course, even Kudlow doesn’t actually have any problem with government spending — as long as that spending is concentrated on Wall Street.

Fox News’ Bill Hemmer Channels House Republicans: ‘Four Words: Where Are The Jobs?’

In July, House Republicans took up the mantra “where are the jobs?” to criticize the Obama administration’s stimulus package, using the phrase over and over on the House floor. With reports emerging that the administration is looking at additional stimulus measures — in the wake of an unexpected uptick in job loss last month — Fox News’ Bill Hemmer adopted the GOP’s catchphrase, invoking it repeatedly today as he searched for “the real solution to the jobs problem in America.” (Not surprisingly, Hemmer’s guests said the solution is permanent corporate tax cuts.) Watch it:

Hemmer might first want to take a look at this analysis by the Economic Policy Institute, which found that the stimulus package “is likely saving or creating between 200,000 and 250,000 jobs a month; without the [stimulus], losses in September would likely have been nearly double what they actually were.”

That said, most analysts are now predicting that unemployment will stay stubbornly high into 2010, and though it makes for very tricky politics, something more will likely have to be done to support the job market. The administration has proposed — and Congress is mulling over — a tax credit for hiring workers or adding “significant hours” (such as making a part-time worker full-time).

However, as Mark Thoma wrote, “I think a policy like this needs to be combined with demand-side policies that create the need for more workers; the tax credit alone won’t be enough.” Indeed, the tax credit is a relatively inefficient way to spur job creation, and it’s hard to tell if it will incentivize many firms that weren’t planning to hire anyway. That’s part of the reason it was scrapped during the original stimulus debate. It’s not a terrible idea, but it’s not a silver bullet either.

The bottom line is that the stimulus is having its expected effect in a economy that is in very bad shape. But is there any hope that Republicans (along with Fox News), who purport to be so concerned about job creation, can get behind additional steps to get the jobs market moving in the right direction?

Hensarling, Chamber Of Commerce Claim CFPA Will Cause Credit Squeeze — But It Didn’t In Canada

This was a busy week for discussion regarding the Consumer Financial Protection Agency (CFPA) that has been proposed as a key part of Congress’ regulatory reform effort. On Wednesday, consumer advocates, the banking industry, and the U.S. Chamber of Commerce presented their perspectives on the new agency before the House Financial Services Committee, and Thursday Federal Reserve Chairman Ben Bernanke followed suit.

When it hasn’t been trying to rewrite history regarding its position on global warming, the Chamber has been one of the organizations leading the charge against the CFPA. To that end, it released a report claiming that a serious (though unquantifiable) amount of job loss would result if the CFPA were to come into existence:

The CFPA would likely reduce an important source of credit to small businesses. This induced credit squeeze comes at a time when it is likely that small business credit will be already highly restricted as the lending industry digs out of the current financial crisis. The CFPA credit squeeze would likely result in business closures, fewer startups, and slower growth. Overall, this would cost a significant number of jobs that would either be lost or not created.

Rep. Jeb Hensarling (R-TX), who has been one of the top crusaders against the CFPA, cited the Chamber’s work, in an attempt to get Bernanke to agree with the notion that the CFPA would cause a credit squeeze, and thus job loss. Watch it:

This all sounds terrible, doesn’t it? A lack of credit causing businesses to downsize, resulting in hoards of job loss, all because of stifling regulation! There’s just one problem with the theory. In 2001, Canada created a consumer protection agency, the Financial Consumer Agency of Canada (FCAC) and, well, none of that happened. As McClatchy reported:

Republicans, backed by the U.S. Chamber of Commerce and bank lobbyists, warn that such an agency would bring punishing costs to consumers and small businesses and could regulate all forms of credit, even tabs at the bar or butcher shop. Canada’s experience suggests otherwise. “I certainly have not seen anything that shows that we are vastly different from the United States in terms of access to credit,” said John Rossi, who heads compliance and enforcement efforts for the Financial Consumer Agency of Canada.

The vice-president of policy at the Canadian Bankers Association did gripe to McClatchy about the fees that the consumer agency imposes on banks, but he “didn’t say these costs were onerous…nor did he suggest that the FCAC has hurt lending, questions that were put to him directly.” And as for job loss, when the agency was created in 2001, the Canadian unemployment rate was 6.9 percent. It was the same rate in 2005, on its way to a low of 5.8 percent before the global economic crisis hit. Not exactly a terrifying jobs record.

September Job Loss Worse Than Expected — Does The Government Need To Do More?

Today’s jobs report was worse than many analysts anticipated, with the unemployment rate rising a bit, to 9.8 percent, and employers shedding 263,000 jobs in September. The broader U6 measure of underemployment is now at 17 percent. Not surprisingly, manufacturing and construction were the hardest hit sectors (with 53,000 government jobs also going up in smoke). While a far cry from the 700,000 jobs that were being lost each month at the beginning of the year, as Bloomberg reported, these numbers are “calling into question the sustainability of the economic recovery.”

One of the biggest problems is the amount of time that active job-searchers are staying unemployed. Planet Money noted that, “as of September, job searchers could expect to spend 26.2 weeks on the hunt — the longest average on record since the BLS started keep records back in 1948.” That amount of time will discourage many a job-seeker, keeping underemployment high.

While it would be nice for the economic recovery to be smooth and fast, in reality, fits and starts like this are to be expected. But the number does call into question whether enough is being done to support the job market. As Nobel Prize-winning economist Paul Krugman wrote today, “all indications are that unless the government does much more than is currently planned to help the economy recover, the job market…will remain terrible for years to come.” Former Labor Secretary Robert Reich agreed, writing that “the federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some.”

But part of this is trying to find patience regarding the effects of the stimulus. As Gov. Arnold Schwarzenegger (R-CA) said yesterday, “the fact of the matter is, in California, it has had a great impact…And remember, every single job that you create is one less person that is out of work.” “I think this has really been a — a terrific success. And I hope they’re going to continue this,” he added. There is still a significant amount of stimulus money waiting to go out, which is a fact that shouldn’t be forgotten.

Plus, while it may make sense economically, I wouldn’t hold my breath for more spending, since Republicans feel that canceling the stimulus and paying down debt will be good for the economy. And it doesn’t help that certain media outlets are claiming that almost ten times as many Americans are unemployed than actually are, making the problem seem insurmountable.

Jobs Report Underscores That It’s ‘Too Early’ For Stimulus Exit

Today’s jobs report — which shows that employers cut 216,000 job in August, pushing the unemployment rate up to 9.7 percent — adds more evidence to the notion that we are headed towards a jobless recovery. While the full force of the recession seems to be behind us, getting back to where we were in terms of employment looks rather daunting:

Economists said the slower pace of job losses provided another sign that the recession was losing steam. The nation’s economic output is expected to rebound over the rest of the year after four quarters of contraction, and the housing market is gradually getting back onto its feet. But economists say employers must create 300,000 to 400,000 jobs a month to bring unemployment rates back to pre-recession levels — a difficult hurdle after such a prolonged downturn.

It’s hard to find many glimmers of hope in these numbers, especially considering that the U6, which measures broad underemployment, is at an all-time high of 16.8 percent. However, the decline is the least severe since August 2008, and much less severe than the 700,000 jobs that we were losing back in February.

Of course, the new numbers have ignited the monthly ritual of conservatives labeling the stimulus a failure. Rep. Eric Cantor (R-VA), after calling this week for completely canceling the stimulus, doubled down today, saying that the jobless numbers mean we should use stimulus funds to “pay down our debt.”

But as Bloomberg News pointed out, “rising joblessness underscores Treasury Secretary Timothy Geithner’s judgment this week that it’s ‘too early’ to start exiting from the unprecedented stimulus measures aimed at stabilizing the economy.” Indeed, as Felix Salmon noted, the effects on economic activity of the overall number of unemployed workers “are huge.” “If each person ends up spending $20,000 less a year on average, that adds up to $138 billion in lost economic activity,” he calculated. It’s because of this vastly reduced activity that the economic stimulus is so important.

Economists at Goldman Sachs predict the U.S. economy will grow by 3.3 percent in the third quarter of this year, and that “without that extra stimulus, we would be somewhere around zero.” But it will take time for GDP growth to translate into job growth, meaning that conservative calls for canceling the stimulus or abandoning all manner of domestic policy items will likely continue. As Matthew Yglesias put it, “your sobering thought of the day is that the unemployment rate will very plausibly continue to edge up for six more months, so if you thought the ‘long hot summer of crazy’ was fun, just look forward to how nutty things get during the looming ‘winter of discontent.’”

CNBC: Unemployment Benefits Are A ‘Fraud,’ We’re ‘Paying People Not To Work’

When Congress returns after the August recess, it plans to consider an extension of unemployment benefits for the 1.5 million Americans whose benefits will run out by the end of the year (a half million of those will run out by the end of September). Last night, CNBC’s Larry Kudlow hosted University of Chicago Professor Casey Mulligan and former Secretary of Labor Robert Reich to discuss, among other things, the effectiveness of benefits as stimulus and a social safety net. Prompted by Kudlow asking Reich if “the thrust of the stimulus plan” constitues “paying people not to work,” Mulligan said:

This is the same fraud coming from the other party. When Republicans did it they called it trickle-down. You do this, you benefit one guy, he goes and spends it and it benefits another guy. The Democrats got their own version now, it’s called Keynesian or whatever, but they’re saying if I give an unemployment check to somebody who’s not working, he’s going to go spend it and create more jobs. It’s just another version of the trickle-down fraud and it’s a fraud.

Watch it:

Reich correctly characterized the dispute as a “ridiculous argument.” But the same ridiculousness was also put forth by conservative columnist Michelle Malkin, who claimed on ABC’s This Week that the unemployed have stopped looking for jobs because “if you put enough government cheese in front of people, they are just going to keep eating it.”

The truth is that unemployment benefits provide a vital lifeline to 9 million Americans who have lost their jobs, and keep those families going in an environment where jobs are scare. As Lawrence Katz, a labor economist at Harvard, explained, “for every job that becomes available, about six people are looking.” “Unemployment insurance gives income to families who are really suffering and can’t find work even if they are hustling to look,” he said.

And unlike trickle-down tax cuts, unemployment benefits are one of the best ways to provide fiscal stimulus, as they are almost certain to be spent quickly. One dollar put towards unemployment benefits contributes about $2.15 to economic growth.

As Maurice Emsellem, a policy director at the National Employment Law Project, said, “if more help is not on the way, by September a huge wave of workers will start running out of their critical extended benefits, and many will have nothing left to get by on even as work keeps getting harder to find.” Indeed, even if job losses have slowed, it’s likely to be some time before employment picks up again, and thus extending benefits is a prudent move.

Despite Jobs Report, Stephen Moore ‘Ready To Declare The Economic Stimulus Plan A Failure’

Today, the latest data from the Bureau of Labor Statistics showed that the unemployment rate unexpectedly fell to 9.4 percent in July, and “businesses cut a much-less-severe 247,000 jobs from their payrolls.” Analysts had anticipated something to the tune of 325,000 jobs lost and a 9.7 percent unemployment rate.

As the New York Times reported, an analysis of the stimulus plan offered by economists “suggests that the punch from increased government spending has helped the economy begin to bottom out faster than it would have otherwise.” However, the Wall Street Journal’s Stephen Moore appeared on Fox News this morning and said that, despite the report, he is “ready to declare the economic stimulus plan a failure.” Watch it:

Moore is right that this is by no means a “good” report overall, but declaring the stimulus a failure at this junction is to ignore the effect that it has already had. “The signs of the stimulus are there,” Allen L. Sinai, chief economist at Decision Economics, told the New York Times. “Government — federal, state and local — is helping take the economy from recession to recovery. I think it’s the primary contributor.” This graph, from a report by the Council of Economic Advisers, shows the impact on job loss that the stimulus has had.

Due to the stimulus, the actual loss has been much less than the projected. So as Tim Fernholz put it, “I hope that these arguments will dispel the ignorant discussion over whether or not the stimulus is ‘working.’ It is doing exactly what economists thought it would, even if the policy wound up being executed in an economic environment that was much worse than expected.”

David Leonhardt noted that the jobs report also shows that “the average hourly pay of rank-and-file workers, which had been flat in June, rose 3 cents in July, to $18.56 an hour. That wage is up 2.5 percent over the past year, while inflation has been roughly zero.” These are encouraging signs. To be sure, the economy is still in a very weak state, and it remains the case that finding a new job is extremely challenging for those who have lost theirs. But that’s precisely why the stimulus dollars need to keep flowing into the economy, boosting demand and stimulating spending as the economy starts to slowly turn around.

The Disparate Impact Of Job Losses On Minorities

One of the less reported angles of the current recession is the way in which the job losses are hitting men and minorities the hardest. So I was glad to see this piece in the New York Times today, highlighting a new report from the New York City comptroller’s office:

While unemployment rose steadily for white New Yorkers from the first quarter of 2008 through the first three months of this year, the number of unemployed blacks in the city rose four times as fast, according to a report to be released on Monday by the city comptroller’s office. By the end of March, there were about 80,000 more unemployed blacks than whites, according to the report, even though there are roughly 1.5 million more whites than blacks here.

While not as extreme as in New York, this disparity has been manifesting itself all over the country:

The consensus from economists is that the massive job losses in the manufacturing, construction, and retail sectors are disproportionately hitting minority populations (which also explains why men account for 74.2 percent of the job losses during the recession). In the latest jobs report, 136,000 of the lost jobs were on factory payrolls, while payrolls at builders fell by 79,000 and service industries subtracted 244,000 workers.

There is no obvious remedy here, but since the economic stimulus package focused its job creating measures on the same sectors that are currently hemorrhaging jobs, there will hopefully be some slow-down in the rising minority unemployment rate. Taking a different tact, William Thompson Jr., Comptroller of the City of New York, used his office’s report to take New York to task for providing inadequate unemployment benefits:

Until they are re-employed, this group is the most economically vulnerable and potentially most in need of public income support programs. One might think that New York, with its reputation as a bastion of liberalism and generosity towards the poor, would provide a better cushion for its unemployed residents than many of our sister states. In fact, maximum benefit levels in New York State are lower than in adjoining states and even lower than benefits in some states with a much lower cost of living, such as Kansas and North Carolina.

As Green for All also pointed out, investments in clean energy from the stimulus package and other legislation “will create pathways to prosperity for millions of Americans, especially in low-income communities and communities of color.”

Getting Unemployment Benefits To All Who Need Them

According to the latest data from the Bureau of Labor Statistics, the U.S. unemployment rate is now 8.9 percent. 13.7 million people are currently unemployed, a number which “has grown by 6 million over the last 12 months.” As MarketWatch noted, “of the 13.7 million people listed as officially unemployed, a record 27.2% have been out of work longer than six months.”

With these numbers providing a backdrop, the Wall Street Journal had a piece today comparing the American unemployment insurance system to that of Europe, and the differences are pretty striking. (See chart on the right.) While going as far as Germany is probably going too far, there is definitely room for the U.S. to do more, given the current circumstances.

One step would be to address the pervasion of overly restrictive eligibility requirements for receiving unemployment benefits. As USA Today reported:

While 13.2 million people were unemployed in March, approximately 5.8 million were collecting unemployment benefits at the end of the month…That means less than half of those who were out of work and were actively trying to find a new job were receiving unemployment benefits.

The stimulus package passed in February did provide money for states to ease their restrictions, but the states have to actively pass legislation to receive the funds, which many have not done. As the National Employment Law Project found, “over 300,000 workers will likely be left without any [benefits] despite the full federal funding provided by [the stimulus package] unless certain states with especially high levels of unemployment act quickly.”

President Obama also announced new initiatives today “to help the unemployed pursue education and training, and at the same time keep their unemployment benefits.” Obama encouraged states to update rules “so that the unemployed can enroll in community colleges and other education or training programs without giving up their benefits,” and to allow colleges to make unemployed workers eligible for Pell Grants.

These are smart steps, but until we actually get benefits to all the people who need them, the President’s plans won’t generate the maximum effect. Considering how many people are out of work, and how slow the economic recovery will likely be, there’s no reason for states to perpetuate unfair and outdated benefit restrictions.

Bobby Jindal’s Louisiana Losing 430 Jobs Per Day Louisiana Had 430 New Unemployed People Every Day In December »

On Friday, Louisiana Gov. Bobby Jindal (R-LA) announced that he would reject nearly $100 million in unemployment insurance funding from the federal government. Jindal said the state would only be accepting money to increase the unemployment insurance payments for those who currently qualify for unemployment insurance and would not accept federal funds to expand unemployment benefits.

So how many people would Jindal’s grand-standing policies affect? According to the Bureau of Labor Statistics, the number of unemployed people in Louisiana spiked from 109,000 in November to 122,000 in December, an increase of over 13,000 people without jobs or 430 additional out of work people every day.

The estimate itself is conservative, as it relies on December 2008 (the most recent Louisiana employment data available) data and does not consider January’s higher unemployment numbers.

While Louisiana’s Lt. Gov., Mitch Landrieu (D), has already criticized Jindal for acting like “the spokesman for the national Republican Party,” rather than representing the interests of Louisiana, the state’s growing unemployment rate only underscores the Governor’s recklessness.

Since other conservative governors (like South Carolina’s Mark Sanford, whose state is losing approximately 830 jobs a day) are jumping on the Jindal band wagon and rejecting much needed stimulus funding, the Wonk Room has compiled a chart of how many new unemployed people there are each day in December in all 50 states.

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Projects Ridiculed By Wall Street Journal Would Create 100 Jobs At One-Tenth the Cost Of Bush Tax Cuts

Our guest blogger is Adam Jentleson, Communications and Outreach Director for the Hyde Park Project at the Center for American Progress Action Fund.

Today, a story in the Wall Street Journal examined “Ready to Go,” a report by the U.S. Conference of Mayors listing “shovel-ready” projects that could get off the ground as soon as the cities receive federal funds. While not explicitly stated, the gist of the Journal story was that many of the projects were wasteful, highlighting things like Frisbee golf courses and neon signs.

Buried in the story was the fact that the ostensibly frivolous proposals it identifies would create 100 jobs:

At a total cost of $7.8 million, that’s $78,000 per job – one-tenth of the cost of every job created by the Bush tax cuts, which spent $871,000 per job (and that figure doesn’t even take into account the last few months of massive job losses).

But the fact that targeted spending – like the projects the mayors are proposing – could create jobs ten times more efficiently than Bush-style tax cuts is not stopping conservatives like Rep. Eric Cantor, Sen. John McCain and Sen. Jim DeMint from beating the drum for more of the same Bushonomics.