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March Madness has descended on Washington – and I’m not talking college basketball. With 25 million people in need of full-time work, in Washington and state capitals across the country the fixation is on how much spending to cut.
This attention deficit disorder confounds economists, offends public opinion and weakens the country. The American Dream will become an ever more distant fantasy for most Americans if citizens don’t mobilize an intervention to shake up Washington once more.
Jobs, Jobs, Jobs
Politicians in Washington may be deluded, but they aren’t fools. They talk constantly about jobs, even as they set about destroying them. Republicans have been taught to “end the sentence,” to finish every sentence by saying “to create jobs.” They’ll cut taxes on the wealthy to create jobs, cut spending on infant nutrition to create jobs, zero out community jobs programs to create jobs. Democrats hold a press conference each week denouncing Republicans for focusing on X (health care, abortion, tax cuts for the rich) rather than jobs.
Ironically the president, who has the only investment agenda that might help generate some jobs, talks the least about jobs. He assumes that the economy is in recovery, and that we’re now turning our attention to “winning the future.”
There Is No Recovery
Sure, the stock market is up; corporate profits are setting records; CEO salaries and Wall Street bonuses are soaring. But there is no recovery. The economy has generated about 1 million jobs since Obama’s Recovery Act saved it from free fall. But, as conservative Federal Reserve Chair Ben Bernanke told the Congress, there has been no progress in recovering the 8½ million jobs lost in the Great Recession. In fact, we’re not generating enough jobs to keep up with new people coming into the workforce. That’s why so many kids go directly from diploma to despair.
Moreover, although President Obama seems to be the only person in Washington to get this, there is nothing to recover to. For the first time in modern history, most families lost ground during 2002-2007, the Bush “recovery” when the economy was growing. The richest 1 percent captured two-thirds of the rewards of growth. Incomes stagnated or fell for most Americans, while costs of basics – health care, housing, college – continued to rise. That’s why debt levels soared and why Wall Street could peddle so many garbage mortgages while on the road to blowing up the economy. America was borrowing $2 billion a day from abroad, sending jobs, not goods, to China.
There is no place to recover to. We’ve got to build a new economy out of the ashes of the old.
So Be It Economics
Washington is captured by the political version of what geeks call GIGO – garbage in, garbage out. A false premise produces false results. False facts produce false answers. Conservatives have been taught to repeat the ditty that “government doesn’t create jobs; only the private sector creates jobs.” (This, of course, comes as a surprise to the managers and machinists of Lockheed and other companies who’ve been going to work and getting paid on government contracts for decades.) But since government spending doesn’t create jobs, Republicans assume that cutting spending won’t cost jobs.
Cutting spending cuts jobs. This isn’t rocket science. That’s why everyone from Bush’s former economic adviser Ben Bernanke, now head of the Fed, to Sen. John McCain’s former lead adviser Mark Zandi, Obama’s former adviser Larry Summers to such Nobel Prize winners as Paul Krugman and Joe Stiglitz who disagree about most everything all concur that cutting spending now is a bad idea. Even Pete Peterson, the billionaire Republican deficit scourge, and former Sen. Alan Simpson, the court jester of the President’s Deficit Commission, agree with that.
So why are Republicans intent on slashing spending now? Goldman Sachs now estimates that the Republican cuts could cost as many as 700,000 jobs. Well, if cutting spending costs jobs, responded House Speaker John Boehner, “so be it.” For Republicans, cutting spending on domestic programs (not reducing deficits because their top end tax cuts and rising military spending keep adding to deficits) is more important than jobs. If spending cuts cost jobs while 25 million people are looking for full-time work, “so be it.”
Jobs Reduce Deficits
The best way to reduce the deficit is to put 8 million Americans to work, taking them off food stamps and unemployment insurance and turning them into taxpayers. The biggest element of every deficit reduction plan – from right to left – is that people go back to work. Yet we are witnessing a jobless recovery, with cuts coming in national, state and local budgets that will put more people out of work.
Goldman Sachs projects that if the cuts Republicans passed in the House are enacted into law, it will cut growth in half. With the Middle East eruption triggering rising oil prices, with Europe already turned to austerity (and England already on the verge of returning to recession), the faltering growth we now have is at risk. Republicans could cut the budget and watch the deficit rise. It is time to focus on rebuilding America.
A Call to Renew America
The agenda for putting people to work and getting the economy going isn’t complicated. Core elements of that agenda are clear. On March 10, a Washington Summit on Jobs and America’s Future (sponsored by the Campaign for America’s Future, which I help direct) will forcefully lay out this agenda.
Rebuild America. There has never been a better opportunity to rebuild our decrepit, costly and outmoded infrastructure that wastes lives, health, time and money. The construction industry is flat on its back. Interest rates are near record lows. Needs – from the old (clean water systems, bridges, schools) to the new – electric grid, fast trains, mass transit – are immense. The president is right to champion an infrastructure bank to mobilize public and private capital in a massive drive to rebuild America.
If government were run like a business, the first thing a sensible CEO would do is move aggressively to seize this opportunity.
Make it in America. We need to make things in American once more. A start would be to insure that we capture a leading role in the green industrial revolution that will sweep the world. That requires investment in research and development, and a strategic policy to counter the war chests employed by China and others to capture these markets.
At the same time, companies and countries should understand that we are serious about seeking more but balanced trade. We should make the transition to new energy a national security imperative, announcing that we will not trade dependence on foreign oil for dependence on imported solar panels. Buy America provisions would insure that taxpayers money is used to generate jobs here not abroad.
President Obama gained a global consensus that surplus countries like China and Germany had to take steps to balance their trade, as well as deficit countries like the U.S. Now they have spurned that agreement. The U.S. should let the Chinese know that we will treat their exports just as they treat ours. Companies should understand that if they want to sell in the U.S. market, they will have to produce here.
It was President Reagan’s embrace of “orderly marketing agreements” with Japan that led Japanese auto companies to locate plants here. America is still the world’s largest single market. Clear signals will change corporate decisions on where to site their plants.
Invest in People. America forged its prosperity by leading the world in public education. Now we are lagging behind. Politicians seem intent on laying blame on teachers and laying waste to education budgets. The House Republicans would slash spending on everything — pre-kindergarten, K-12, worker training and college education. They seem to want American to compete in the world for low-wage, unskilled labor. Maybe they don’t notice the billions of people willing to work for a dollar a day.
In the old impoverished French immigrant communities in Northern Maine, the school was the most magnificent building after the church. Children knew they were special and that learning was important. In America’s affluent suburbs, public schools are modern, with dazzling equipment and facilities. The children who attend them lead the world in math, science and creativity. We should be investing big-time in education – from pre-school to affordable college.
A Rich Nation Can Afford It
Parts of this agenda – like Making it in America – don’t cost much money. Part — like investment in infrastructure– should be financed now when interest rates and low and labor is available. Some we should pay for – but in ways that provide a net stimulus to jobs here, not a net loss.
Consider: Corporations are sitting on $2 trillion in capital they won’t invest until the economy starts to lift. U.S. multinationals are using this period to invest in growing markets abroad, often cutting jobs here. Instead of cutting taxes on corporations, we might sensibly be taxing them to generate funds that will be invested here at home.
The wealthiest people – the 1 percent who have captured fully 50 percent of all the income growth since 1979 – now pay, as Warren Buffett notes, a lower rate of taxes than the teachers who are under siege in Wisconsin, Ohio and elsewhere. Raise taxes on the wealthy; invest that money in areas vital to our future. America enjoyed its greatest prosperity and built its middle class in the post war era when the top marginal tax rate was 90 percent. Merely returning to the tax rates under Reagan would generate the resources need to rebuild America.
Tax private speculation to pay for public investment. A small financial speculation tax would slow the computer driven bets on Wall Street, reduce instability that generates financial crises, and generate over $100 billion a year for real investment in areas vital to our future.
America spends a staggering $1.2 trillion a year on its military and security budgets, more than twice as much as we spend on all domestic programs, outside of self-funded programs like Medicare and Social Security. (Social Security remains in surplus; Medicare now draws from general funds for some of its costs). We spending about as much on our military as the rest of the world’s military budgets combined. The much ballyhooed “cuts” offered up by the Pentagon will result in a budget that continues to grow faster than inflation. Waste fraud and abuse is rampant.
Instead of a debate about how much to slash domestic spending, offering a choice between deep cuts (the Republican position) or a five-year freeze (the president’s position), why not pull an Eisenhower, put a hard freeze on security spending for five years, and force the Pentagon and the national security establishment to set priorities and clean up its act. This would generate roughly $800 billion in savings to be used to rebuild America.
If we did these things, we would generate more jobs, more taxpayers, fewer folks on unemployment and reduce the deficit far more than the “so be it” economics now dominating Washington.
Redeem the Dream
This is a rich country that has lost its way. We’ve let the powerful rig the rules, so the economy enriches the few rather than rewarding the many. We’ve let global corporations run our trade policy, so we’re patsies for savvy mercantilist traders like the Chinese. We’ve let finance dominate the real economy, substituting the gambling for investment. We’ve lavished resources on our military while staving investments vital to our economy. And now, we have the delusion that we can cut our way back to economic vitality.
Meanwhile, the thing that made America special – the American Dream, the prospect that if you worked hard, you could make it in America – is increasingly at risk. Twenty-five million people aren’t suffering from a lack of work ethic; they are suffering from a lack of work. Veterans returning from foreign battlefields aren’t looking for charity; they are looking for jobs.
Much to the surprise of conservatives, Americans have rallied to the teachers, nurses and sanitation workers under siege in Wisconsin, Ohio and elsewhere. We’ve begun to realize that the cutbacks in wages, benefits and the right to organize and bargain take us further down the road to decline. Perhaps that energy can feed a movement for jobs, a movement to redeem the American Dream. It must come to Washington, because it sure as hell won’t come from there.