A call for a $1.2 trillion program of federal infrastructure spending is definitely not what you would expect to emerge from the think tank Third Way, the purveyors of austerity-lite, era-of-big-government-is-over centrism within the Democratic Party establishment.
But that is exactly is what economist and investment banker Daniel Alpert has concluded in a paper issued this week by Third Way, “GLUT: The U.S. Economy and the American Worker in the Age of Oversupply.” In doing so, Third Way is helping to mainstream the same kind of jumpstart in job-producing investment called for by presidential candidate Bernie Sanders and the Congressional Progressive Caucus.
Both Sanders and the Progressive Caucus have put forward proposals for $1 trillion in infrastructure spending, Sanders in the form of a bill he has introduced as Vermont senator, and the Progressive Caucus in the form of a central provision of the People’s Budget, a comprehensive spending blueprint that has been offered as an alternative to the budget sent to the floor by House Republicans.
The “glut” that Alpert refers to in the title of his paper refers to the number of workers in the U.S. who are either unemployed, working part time when they want full-time work, or are not counted as looking for work at all but would get off the sidelines if they felt it would be worth it to jump into the labor pool.
The size of what Alpert also calls an “oversupply” of labor is reflected somewhat in Tuesday’s release by the Labor Department of its latest Job Openings and Labor Turnover Survey (JOLTS). That report showed that for every 10 job openings, there were 14 job seekers. That is a dramatic difference from what the job market looked like at the peak of the 2008-2009 recession, when those 10 job openings would have been swarmed by as many as 64 unemployed applicants. But, as Elise Gould of the Employment Policy Institute points out in her analysis of the report, a ratio of 1.4 to 1 is still far larger than it would it be in a tight labor market, such as the close to 1:1 ratio that existed in 1999 and 2000.
Plus, Gould writes, “The job-seekers ratio also fails to reflect the missing workers in the economy today—in other words, those who are not actively seeking a job (in the last four weeks), but would likely start looking if the economy was stronger and they saw better opportunities for themselves in it.”
Finally, the overall ratio masks broad differences across job sectors, particularly in such blue-collar areas as manufacturing, where the ratio of job seekers to jobs is closer to 2-to-1, and construction, where the ratio is about 4-to-1.
Alpert puts his finger on the core of the job-creation problem: Because there is not enough demand for goods and services, the private sector is hoarding capital rather than reinvesting it in job-producing activities, such as new plants and equipment. Nor does it make sense for companies to raise wages (so people would have more money to demand goods and services) as long as there is an overabundance of unemployed labor.
This is a downward cycle that the private sector cannot break on its own, Alpert writes. It won’t be addressed, he says, by “cutting taxes and creating subsidies” because those don’t get at the oversupply issue – indirectly calling out Republican lawmakers who argue that corporate tax cuts and less regulation are all that is needed to spur private job creation.
“Government needs to step into the breach now unfilled by the private sector to dramatically increase job-producing capital investment,” he concludes. “Government must close the virtuous circle of capital that is otherwise blocked in the age of oversupply. And there is a screaming need for such capital investment in the improvement of the country’s dilapidated infrastructure.”
He writes that “a five-year, $1.2 trillion public investment program in transportation, energy, communications, and water infrastructure would create an additional 5.5 million jobs or more in each year of the program.” He further argues that this should be deficit spending: “I am proposing that the U.S. government use its credit (either directly or through a newly constituted infrastructure bank) to borrow the excess capital necessary to make such investment from the overstuffed pool of excess capital sloshing around the globe and available to the U.S. at interest rates that make borrowing and investing it wisely an economic imperative, if not actually a moral one.”
Of course, this would not be a Third Way paper without some unwarranted slaps against progressive economic policy goals, such as a higher minimum wage (which he says would lead to some low-wage workers being replaced by technology) and increased labor bargaining power (which “may result in a displacement of jobs to non-unionized jurisdictions or abroad”). He also wrongly argues that the “labor problem in America is one of natural causes” – a patently false framing that lets off the hook the cabal of corporate and political interests that quite deliberately set out to devalue workers in order to maximize their own share of the wealth.
But give Third Way credit for at least acknowledging one fundamental reality: The anemic growth that is the result of the constraints anti-government and obstructionist Republicans have placed on the federal government to invest in the future is killing us slowly. Giving conservatives full reign to fully impose their agenda of disinvestment and top-end tax-cutting would accelerate the bleeding. In the context of the damage yet to be repaired from the Great Recession and the failures that followed, the medicine being proposed by Sanders and the Progressive Caucus is hardly extreme. Extreme would be doing anything less.