Today’s jobs report from the Labor Department should not be spun as positive, even though at a net increase of 117,000 jobs it is better than the Wall Street consensus. While the White House may breathe a sign of relief that the numbers were not lower, one fundamental reality does not change: The deficit reduction deal has moved the nation in the wrong direction. We need, as politically incorrect as it may be to say so, more spending in the short term to put people back to work, doing work that must be done to strengthen the economy in the long run.
The numbers do not change the fundamental point that Paul Krugman makes in his column today that "it’s now time — long past time — to get serious about the real crisis the economy faces. The Fed needs to stop making excuses, while the president needs to come up with real job-creation proposals."
Consider one crucial measure, the ratio of employment to population. In June 2007, around 63 percent of adults were employed. In June 2009, the official end of the recession, that number was down to 59.4. As of June 2011, two years into the alleged recovery, the number was: 58.2.
These may sound like dry statistics, but they reflect a truly terrible reality. Not only are vast numbers of Americans unemployed or underemployed, for the first time since the Great Depression many American workers are facing the prospect of very-long-term — maybe permanent — unemployment. Among other things, the rise in long-term unemployment will reduce future government revenues, so we’re not even acting sensibly in purely fiscal terms. But, more important, it’s a human catastrophe.
Today’s jobs report comes on the heels of a global drop in stock markets—evidence that austerity is not just failing in the United States; it is failing globally. Economist Dean Baker pointed this out in his reaction to Thursday’s 512-point drop in the Dow:
"The debt problems hitting Ireland and Greece have spread to two of the four euro zone giants, Italy and Spain. The prudes at the European Central Bank are going have to relearn economics very quickly. Their cult of 2 percent inflation is bringing down the house. They have come to the point where they have to choose between abandoning the cult or ending the euro. Naturally the prospect of the dissolution of one of the world two main currencies is going to unnerve the markets.
"… Those still believing in the virtues of government austerity also got a big kick in the face last week. The UK had its third consecutive quarter of near zero growth – the apparent fruits of the austerity path put in place by the new Conservative government."
The assessment that the debt deal signed by President Obama—a deal that House Speaker John Boehner said gave him and conservatives "98 percent of what we wanted"—will kill job growth is near universal among economic experts who deal in facts rather than right-wing fancy. Jim Luke at EconProph notes: "J.P.Morgan Chase Bank’s research department, as representative of Wall Street as any, says that overall with this deal, government budget policy in 2012 subtract at least 1.5% points from GDP growth rate in 2012. Since it takes at least 2% growth in GDP to keep unemployment stable and we haven’t even had a single quarter of growth at more than a 4% rate since the end of 2006, things look grim for employment."
The Economic Policy Institute on Thursday released a research report that concluded that the spending cuts in the deal will reduce GDP by $43 billion in 2012, lowering employment by roughly 323,000 jobs. Add the impact of failing to extend the payroll tax cut and emergency unemployment benefits beyond the end of 2011 and EPI calculates additional job losses of about 1.5 million. In other words, EPI concludes, the debt ceiling deal will result in more jobs lost in 2012, relative to current budget policy, than have been created since employment bottomed in early 2010.
President Obama was scheduled to appear at the Washington Navy Yard today to announce a proposal to give employers tax breaks to hire the 1 million military veterans who are currently unemployed.
Think about that for a moment. We have 1 million people who fought in Iraq and Afghanistan who cannot find work in this country. And we have to give tax breaks to employers to encourage them to hire these soldiers who defended this country? Give me a break.
What the nation needs to hear from President Obama is how we are going to get the entire country back to work. The first step is for the president to tell the nation the truth: The extremists who have taken over the Republican Party were allowed to drive the nation into an economic ditch. And while we are in that ditch, constrained by a deal that prematurely forces cuts in government discretionary spending, we are not going to be able to do what we must: Launch a set of immediate initiatives designed to lower unemployment now and get the economy moving. That would mean increasing spending in the short term to build an economy with the capacity to pay down debt in the long term. (The Campaign for America’s Future spells out the elements of an economic growth and jobs strategy in this news release.)
The reality is that the deficit reduction deal will add to a $1.3 trillion gap between the size of our economy now and what the size of the economy would be if the economy were growing at the rate it has grown historically.
The fact that it may be politically unrealistic to expect that the right policies will get through a tea-party-besotted Congress does not mean that President Obama, and progressives, should not be fighting for these policies—because only by fighting for these policies will we have any hope of making the politically unrealistic politically attainable.
One step in that direction is a petition the Campaign for America’s Future is calling for people to sign. Part of the debt deal is an ill-advised, 12-member congressional committee that will make recommendations on about $1.5 trillion in budget cuts. We can insist that the Democrats on that committee be progressives like Sen. Bernie Sanders and Reps. Keith Ellison and Raul Grijalva, who have argued forcefully for a jobs-first economic policy and for asking millionaires and billionaires to do their fair share for deficit reduction.
Yes, 117,000 jobs is better than nothing. But when the need is for the economy to produce at least three times that for the next three years to begin to close the jobs gap, we must demand a change of direction in our economic policy, seizing the controls back from the radical right and their appeasers.