"Full employment," according to some economists and policymakers, is not as full as it used to be. The upshot is that many people in Washington are beginning to regard as "normal" what should be unacceptable.
That's one more reason why it is important to build a groundswell of support for the proposals in the Congressional Progressive Caucus "Better Off Budget," which sets the bar higher than any other economic plan when it comes to job creation: close to 9 million jobs over three years, and an unemployment rate that would be brought down to about 5 percent in as early as 2015. (Sign this petition to become a citizen co-sponsor of the Progressive Caucus Budget.)
That is more audacious than what would be accomplished by the Obama administration's budget, which projects that its enactment would leave unemployment averaging 6 percent in 2017 and never falling below 5.4 percent for the remainder of the decade.
But it is important to acknowledge that even the Progressive Caucus budget is built around a shift in thinking about the economy's job-creating capacity that effectively limits the parameters of the debate over what our spending, taxing and deficit policies should be. We should not settle for those limits.
That shift was recently embodied in a Bloomberg View column by Evan Soltas, "Is This the Best the Economy Can Do?" in which he suggests that "maybe we're running near full speed but don't know it."
The lack of productivity growth is a telltale sign, he writes, as well as Fed estimates that factories are running near capacity even though production is only up to the levels reached in 2007, before the recession.
That view is also enshrined in the latest Congressional Budget Office projections of potential output, which predicts a potential gross national product in 2017 that is 7.3 percent lower than projections in 2007. As a result, what CBO considers full employment – the level of unemployment that would exist for reasons other than the business cycle and short-term structural factors – has increased from 5 percent to 5.5 percent "because of changes in long-term structural factors."
The Progressive Caucus uses the Congressional Budget Office estimates of potential GNP in estimating what it would take to close the "jobs gap" – the gap between where the job market is now as a result of the recession and where it would be if the economy is operating at full capacity. It is the reason why EPI economist Joshua Smith called the budget "small 'c' conservative." To its credit, the Progressive Caucus budget includes policies that would bring the unemployment rate below 5.5 percent, according to an Economic Policy Institute analysis. But more importantly, it includes measures that would target job creation at areas of the country with persistently high unemployment.
That latter point is critical. Without special efforts in communities and segments of the country with persistently high unemployment, we could see African-American unemployment remain above 10 percent for the remainder of the decade (it's currently 12 percent) and Latino unemployment averaging above 6.5 percent, down from 8.1 percent now.
There were 22 metropolitan areas in the country with unemployment rates above 10 percent in December, according to the Bureau of Labor Statistics, and dozens more that were above 8 percent. It is these parts of the country that need special attention, and the federal government should have the programs and resources to assist states and localities in rebuilding their economies. Those programs exist in the Progressive Caucus budget, and we should push for their adoption.
But beyond that, we should be challenging the assumption that a slow-growth economy that leaves millions of people behind is as good as it gets. Those assumptions are based on the world created by wrong-headed conservative economic policies, and corporatist trade deals that moved millions of jobs overseas, devastating our middle class and hollowing out our industrial capacity. They are based on a federal government that has been forced by conservatives in Congress to retreat from funding the research and innovation that will drive the next wave of economic growth and prosperity.
Our imperative has to be to say in all of these areas that we can and must do better.
Instead of fast-tracking a Trans-Pacific Partnership that will continue the pattern of moving jobs overseas and fueling a wage race to the bottom, let's use the democratic process to create a more equal trade relationship with the rest of the world, based on the interests of workers rather than solely on the interest of multinational corporations.
Instead of being paralyzed by fear of inflation and myths about the sustainability of our long-term debt, let's assert that the enterprise of rebuilding our middle class is worth going beyond the constraints of the "Fix the Debt" crowd, which is in fact profiting quite nicely from the desperation of a 99 percent under stress from high unemployment and falling wages.
There is a lot of work involved in pushing back against the "new normal." The work begins with treating the Better Off Budget as a serious, mainstream proposal for getting our economy working again. But it does not stop there.
Sign this petition to become a citizen co-sponsor of the Progressive Caucus Better Off Budget.