This week, President Obama will travel to Austin, Texas to call for action on jobs. The proposals the president put forth in his State of the Union address – investing in infrastructure, expanding preschool, bolstering manufacturing assistance centers, raising the minimum wage – have been blocked in the Congress, and disappeared from the public debate.
The president wants to revive his jobs agenda while still touting the economic recovery. In his commencement address at Ohio State University last weekend, he reassured students:
“While things are still hard for a lot of people, you have every reason to believe that your future is bright. You’re graduating into an economy and a job market that is steadily healing.”
The White House points to 38 straight months of private sector jobs growth, but in reality, jobs have been largely left behind in the recovery. The stock market is setting new records, but over 20 million people still are in need of full-time work. The labor force participation rate – the percentage of workers who have a job or are looking for one – is down to levels not seen since 1979. The jobs being created pay less with fewer benefits than the jobs that were lost. As a result, inequality is still growing; the middle class is still sinking. And young people are graduating into one of the worst jobs markets since the Great Depression.
In many ways, the fact that the economy is “steadily healing” back to the old economy is the problem, not the solution. That economy featured growing inequality and a declining middle class. It was built on debt and speculative bubbles. Trade deficits hit new records as multinational companies shipped good jobs abroad.
In his first year in office, President Obama argued that we couldn’t go back to that economy and shouldn’t want to. We had to build a new foundation for growth. But in fact, gridlock in Washington has virtually ensured that we would drift back into the old economy.
Once more the Federal Reserve offers the only ballast for the economy by holding interest rates at record lows. The big banks have emerged from the recession bigger and more concentrated than ever. That virtually ensures a reach for increasing risk as we wait for the next bubble. The trade deficit is back over $1 billion a day, despite the natural gas explosion that reduces U.S. dependence on imported oil. The assault on unions has escalated. Part-time minimum-wage jobs proliferate. The richest 1 percent of the country captured a staggering 112 percent of the income growth in the first two years coming out of the recession. The 99 percent on average lost ground.
It will take a dramatic change in policy to build a new foundation for growth in this economy. The president’s proposals are but modest markers on the path forward, but barely get notice in a Washington still focused on a debate about austerity – about what to cut and how deep. This will only change if citizens organize independently and demand that Washington move. Voters will have to identify and punish those legislators who are standing in the way.
The core elements of a jobs agenda for the U.S. now are not particularly controversial. Consider a three part program:
With interest rates at record lows and the construction industry still moribund, we should be grabbing this opportunity to rebuild our aged infrastructure – everything from airports to sewer systems to the electric grid – to world-class competitive standards. This is vital both for public health and for the economy. The Federal Reserve is now spending $45 billion a month buying mortgage-backed securities. This bolsters the banks and helps keep interest rates low, but it only feeds the casino economy. Why not create an infrastructure bank, and have the Federal Reserve buy its bonds? This wouldn’t add to the national debt, would build things we need and put people to work.
Any smart investment agenda would also insure that we are providing the basics in education to every child – infant nutrition, preschool, smaller classes in the early grades, after school and summer enrichment programs, good teachers and affordable college. Instead we are laying off teachers, locking kids out of Head Start and making college increasingly unaffordable. No nation can afford to waste a generation.
An American Global Strategy
The world cannot afford to go back to the unsustainable imbalances in trade that contributed directly to the financial bubble and collapse. The nation cannot afford to let multinationals define our global strategy. We should announce that we will balance our trade over the next five years. That will put multinationals on notice that if they want to sell in the U.S. they should build in the U.S. We should crack down on currency violations and treat mercantilist nations as they treat us.
Balanced trade should be accompanied by an aggressive industrial policy to capture a lead in the green industrial revolution that will sweep the world. We should be expanding, not cutting investment in research and development. We should seed regional renewable energy strategies, set renewable energy standards that will accelerate changes that are already beginning. The U.S. should be leading, not lagging, in the industrial frontiers, from biotechnology to nanotechnology to 3D printing.
Fair Share Strategy
Finally, we need to insure that workers capture a fair share of the profits and productivity that they help to create. Lift the minimum wage and index it to inflation. Empower workers to organize and bargain collectively. Pass immigration reform to bring millions out from the shadows. End perverse CEO compensation policies that give executives million-dollar incentives to plunder their own companies.
This isn’t rocket science. It isn’t comprehensive. It is a sensible beginning to creating good jobs and reviving a middle class. We can pay for it through progressive tax reform, with particular focus on the trillions now sheltered abroad to avoid taxation.
The president’s plans provide markers on this path. He’d invest in preschool and infrastructure, provide assistance and tax breaks to domestic manufacturers, raise the minimum wage. What’s clear is that “recovering” the old economy is a path to ruin. The broad middle class that made America exceptional will disappear. A nation of haves and have nots, of bubbles and busts, of private wealth and starved public services will be nasty, brutish and without hope.
At this point, Washington isn’t debating how to create jobs and rebuild the middle class. It is arguing only about who bears the pain in the decline. This will change only when citizens demand it. The only question is how much damage will be inflicted before that begins.