The economy is said to be recovering, but the people are not. The jobs are gone, and haven’t started to come back. Twenty-five million people are in need of full-time work. Incomes are stagnant; more and more are losing health care. Even the uptick in jobs that will be reported on Friday is misleading, reflecting temporary hiring for the Census and recovery from snow-bound February.
So what is the strategy? President Obama initially got the big things right. A big recovery plan—featuring deficit-financed investment in infrastructure, aid to states and localities, a boost to new energy—would stem the collapse and put people to work. The bank rescue would get the financial system lending again. Investments in new energy—and in education, research and development and infrastructure—would rebuild the economy on a new foundation, while capturing a leading role in the new green industrial revolution.
But as T.S. Eliot wrote, between the vision and the act lies the shadow. The recovery plan was weakened by conservatives in both parties who larded in top-end tax cuts and cut out infrastructure spending. People saved the tax cuts that they’ve forgotten they ever got. And budget cuts and tax hikes in the states and localities—50 little Herbert Hoovers, Paul Krugman called them—effectively negated the federal stimulus. The energy money got spent, but most of the jobs, the Apollo Alliance found, were created abroad, where countries from Spain to China had aggressive industrial policies designed to capture the new industries. The start made on new investments in education and infrastructure is now running into the budget freeze, and the premature turn to deficit reduction in Washington.
Americans, not surprisingly, are frustrated and angry. Recent polling by the Democracy Corps shows people are growing more pessimistic about the economy. A growing majority think the country is significantly on the wrong track. Growing numbers disapprove of the president’s and the Democratic Congress’ performance on the economy. A growing number are ready to punish Democrats at the polls in November in protest. It is time to retool.
Jobs, jobs, jobs
The first order of business is for the president to focus on jobs. He vowed to do so in the State of the Union address and then spent the next months talking about health care. Now the temptation will be to sell the health care triumph, push financial reform, and revive international initiatives from arms control to the Middle East. All vital efforts, but none can get in the way of a concerted focus on jobs.
First, the president needs to explain to Americans where we are, that we can’t wait for a recovery to create jobs, because there is no recovery to the old economy. That economy was based on debt-financed bubbles that burst. We can’t go back there and should not want to.
That requires we dig out of a very deep hole. This will take time. In the short term, the president should get back in front of the jobs debate in Washington. He put some $260 billion in his budget for jobs creation and unemployment support—but has said little about it since. It is time to champion measures big enough to deal with the scope of the challenge. As of this week 105 co-sponsors have joined Rep. George Miller on legislation calling for $100 billion to go to localities and nonprofits for jobs. Estimates are that the legislation could save or generate over a million jobs. Conservatives in both parties scorn spending more money on jobs, even as layoffs of teachers, police and firefighters increase. The president should take this on and champion the bill as one part of the response, calling for paying for it by reviving his tax on the banks to get our money back.
Then the White House should turn tax day, April 15, into trade day. On that date, the Treasury must decide whether to recognize reality and name China, among others, as a country that is manipulating its currency to gain trade advantage. Do it. Speak truth. Enlist allies to join. Declare that the U.S. will no longer simply ignore the reality that some countries are playing by a different set of rules. While the president takes the issue to the G-20, the Congress will start hearings on tariffs to counter the effect of undervalued currencies. The labor movement could launch a drive across the country to pass buy-America standards for public procurement at the state and local level. The common-sense proposition that taxpayer dollars should be spent to create maximum jobs here, not abroad is popular across the political divides.
The point of all of this is simple and necessary. China and the mercantilist nations have to be confronted with the reality that we are not going back to the old economy—where the U.S. borrows money to serve as the consumer of last resort to the world and they can depend totally on export-led growth. Global companies must be put on notice that they have to make things in America if they expect access to America’s markets. And the global community has to find a way to enforce the stated commitment to moving to a more balanced trade system through growth rather than recession.
Then the White House could launch a Rebuild America tour, calling attention to the staggering costs of an investment deficit that results in collapsing sewers, fouled drinking water, clogged roads and slow trains, decrepit schools, an outmoded energy grid and more. Use this to champion a public investment bank, able to mobilize public and private capital to invest in rebuilding America. Invite states and localities to join. Enlist public and private pension funds—the workers’ money—to invest with government guarantees in rebuilding America and putting workers back to work.
The harsh reality is that there are no short-term fixes to mass unemployment. As the president has said, we have to rebuild the economy on a new foundation. All that takes time. Americans understand the trouble we’re in, but get sensibly angry when they see the big banks handing out million-dollar bonuses while their jobs are gone and their incomes flat. They can’t figure out why we’d spend taxpayers’ money building windmills in China. They’ll be patient, but if and only if they are convinced that the president has a strategy that makes sense and that he is focused on pursuing.
Obama is blessed with a conservative opposition that is clueless. They insist on arguing that if we just do more of what drove us into this ditch, we’ll surely get out. The president easily wins the argument about why we need a new course. Voters are turning to Republicans not for direction but for protest. It’s time for the president to step up, make the argument, define the agenda and drive the Congress to act. It is long past time to focus on jobs.