Don't Kill Jobs

The Campaign Disconnect

Isaiah J. Poole — Mon, 04 Oct 2010 12:36:02 -0400

One in five American kids was living in poverty in 2009. Across the country, once solidly middle-class families are lining up at food pantries and soup kitchens for groceries or a hot meal. In New York City, a startling indicator of the continuing economic stress is the rise in the number of homes that don’t have kitchens.

Election Day is approaching, but neither party cares to focus on the nightmare facing millions of Americans who have been laid low by unemployment, home foreclosures, personal bankruptcies, and jobs that offer only part-time work, lousy pay and absolutely no benefits.

In an era of extreme economic inequality (which is another way of saying economic unfairness), Wall Street can be on a roll and corporate profits can streak toward the moon at the same time that ordinary American families are stuck in depression-like conditions with precious little hope of relief.

Kuttner on CNBC Attacks Austerity Economics

Isaiah J. Poole — Thu, 16 Sep 2010 17:54:10 -0400

The contrast between an aggressive policy of jump-starting growth and putting Americans back to work and the old, failed trickle-down economics formula was on sharp display Thursday in a mini-debate on CNBC Thursday between Robert Kuttner of The American Prospect and Andrew Busch of BMO Capital Markets.

Both were invited to respond to the statement signed by more than 300 economists and civic leaders that warned against killing growth and jobs in the name of deficit reduction.

Kuttner warned that "unemployment is going to plateau around 10 percent indefinitely unless we get a stronger economy going," he said. Government has to step in to spark the demand that the private sector is not creating on its own, and in a news conference earlier in the day, Kuttner pointed out that when interest rates are at historic lows, now is the best time for the government to borrow to stimulate the economic growth that will enable the government to more easily lower the deficit later. "We prefer recovery first, then you get to work on reducing the deficit," he said.

Busch makes several errors in his rejoinder to Kuttner.

He dismisses government as a jobs creator, when in fact public investments in infrastructure, schools and other public goods are the foundation for successful private sector job creation. All we need to do is look to China, which is investing billions of dollars in its transportation infrastructure and using that investment to help its businesses to operate more cost-effectively, while U.S. businesses lose time and money attempting to move goods through outmoded roads, rails and ports. Or we can look at such countries as South Korea, where high-quality, high-performing schools are churning out the next generation of technology pioneers.

Government is certainly a jobs facilitator, and we should not allow conservatives to keep selling the idea of a disconnect between a healthy government and a healthy private sector. They go hand in hand.

He also repeats the right-wing mantra that the Obama administration spent $862 billion to no good effect. It bears repeating again and again: One-third of the Recovery Act stimulus package was tax cuts. Only two-thirds was "spending." And that two-thirds, about $500 billion. appears inadequate because it was inadequate to cover an economic hole of up to $2 trillion. Yet, even that $500 billion was enough to keep the economy from sliding into depression.

"Why don't we try something else?" Busch asks. The answer is, we did. Remember the Bush tax cuts? Remember the deregulation of Wall Street? The Bush tax cuts did nothing to increase the real incomes of working-class Americans in the last decade—note David Leonhardt's recent overview of income and economic growth during the past three decades—and the right-wing deregulation binge set the stage for the subsequent economic crash on Wall Street as well as tainted food, tainted toys and environmental disasters.

The common-sense choice is what Kuttner poses, and at the end he proposes the correct question for the Obama administration: Will you go bold and support a program that first puts Americans back to work doing the work that must be done, then addresses the deficit in the context of a stronger economy?

Austerity Chic: It's This Year's "Weapons of Mass Destruction"

Richard Eskow — Thu, 16 Sep 2010 17:38:31 -0400

Sometimes our political commentariat seems to go fashion-crazy. When a new trend gets popular it overwhelms everything in its path: logic, poltical divisions, even expert opinion. The latest vogue is deficit reduction, and our nation's Anna Wintours tell us we simply have to have it. In Washington, screaming about being in the red is the new black.

Call it "austerity chic," and it's catching on fast. We've already written about an odd quartet of recent austerity-chic pieces from pundits that included Tom Friedman and Anne Applebaum. These pieces tell us why we should find this new style appealing: Self-denial is what makes a nation great.

We've seen this herd mentality before, of course, most notably in the run-up to the invasion of Iraq. The experts warned us what would happen, but our keyboard-clacking dedicated followers of fashion thought they knew better. Ever eager to issue the clarion call for sacrifice - on somebody else's part - they issued their calls to arms. Their support played a pivotal role in building support for the invasion.

How'd that work out for you?

Once again, the experts tell us that the warning lights are flashing red and the fashionistas aren't listening. That was made clear again this morning, when a conference call was held to announce that 300 economist and civic leaders have signed a statement saying that "there is a grave danger that the still-fragile economic recovery will be undercut by austerity economics." The statement, released by the Institute For America's Future*, adds: "A turn by major governments away from the promotion of growth and jobs and to premature focus on deficit reduction could slow growth and increase unemployment - and could push us back into recession."

Contrast those sentences with the fetishized way Friedman approached reduced spending in his column. "The Greatest Generation's leaders were never afraid to ask Americans to sacrifice," he writes, whereas today's Americans "had a values breakdown." Here's what Friedman's missing: With 15 million people unemployed and 44 million in poverty, a lot of people are sacrificing right now. As for Applebaum, her orgiastic descriptions of "axe-wielding," "slashing" British budget cuts have to be read to be believed (although I did provide a summary here, if you're the type who shuts their eyes during slasher movies.)

Friedman and Applebaum aren't the only dedicated followers of fashion to join the austerity trend, of course. As we noted in the Friedman/Applebaum piece, Megan McArdle high-fived another business writer for dismissing retirement as a "vacation" while adding that "decades-long" vacations are an indulgence we can no longer afford. And Fareed Zakaria has flirted with the Austerians more than once, although he leans more toward letting all the tax cuts expire. Zakaria's followed at least two other trends recently - the notion that fear of Obama is hampering business investment and the idea that the Great Recession was really your fault - so this isn't a great surprise. (I'm not as down on Zakaria as it might sound. He's a smart guy and his TV show's usually quite interesting. Maybe his "fashion sense" just gets in the way of his common sense.)

In the world of political fashion, Republicans set the trend and others follow. Austerity chic's no exception. As with Iraq, it has just enough Democratic support to provide the "bipartisan" gloss needed to give it critical mass. The latest supporter is Secretary of State Hillary Clinton, who upped the rhetorical ante recently by declaring the deficit a "national security threat." Erskine Bowles and Rep. Steny Hoyer are among the other prominent Democrats who have jumped on the bandwagon.

But if some Democrats are including are wearing a splash of this year's color, right-wingers are painting their faces with it. John Boehner's call for a 15% cut in domestic spending would plunge the nation back into a deep recession. The Tea Partiers' calls for deep cuts in Social Security would immediately plunge 20 million seniors into poverty, followed shortly thereafter by a massive spike in unemployment as their purchasing power leaves the economy. And their cuts to Medicare and education would further crush our already-wounded economy. (For more information, see Adele Stan's Five Ways the Tea Party Agenda Screws Tea Party Supporters.)

As Dean Baker pointed out on this morning's call, government spending is not the cause of our current deficits. Two wars and a massive tax cut turned a surplus into a massive deficit. (I'd add a massive bank bailout with no reqruiements to limit profits or increase lending.) And, as Baker observed, greater unemployment always leads to greater deficits. Robert Reich, another participant in the call, observed that last quarter's slowdown in the growth of the economy is a warning sign in an already-grave situation. Theresa Ghilarducci suggested that an increase in Social Security could help stimulate growth. All agreed that greater spending is urgently needed to stimulate the economy, leaving deficits to be addressed once economic conditions are healthier.

If "austerity" is this year's "WMD," that doesn't mean that's deficits aren't a concern. They are, and so is the need to keep powerful weapons out of the wrong hands. It's a matter of proportion and priority. The economists who signed today's statement understand the need to reduce the deficit. But they also know that the economy needs to recover first, and that budget cuts - like military might - must be directed toward genuine threats.

Right now the 300 people who signed this statement are as outnumbered as the Spartans at the Battle of Thermopylae. Let's hope they do as well. As for Applebaum and Friedman, is it churlish to point out that they were both cheerleaders for the invasion of Iraq? I don't think so. Then, as now, they embraced and promoted a Beltway trend without sufficient thought or foresight. And they've demonstrated a stubborn resistance to face reality in both cases. Applebaum greeted the bipartisan Baker report on Iraq with resentment. She continues to insist, against most experts' opinions, that we won't know whether the war went well for at least a decade. And now, unbowed by past errors, she's trying to drum up support for an attack on Iran.

As for Friedman, he said "we need to give the war six more months" so many times that observers began describing these intervals as "Friedman units." Friedman's enthusiasm for that war led him to the most notorious moment of his career, when he told Charlie Rose that it didn't matter which country we attacked. Any Muslim nation would do, he said, as long as Muslims everywhere saw "American boys and girls going door to door and saying ... you don't think we care? ... You think this bubble fantasy, we're just going to let it grow? Well, suck on this."

That was fifteen Friedman units ago, and people change. Friedman's done his mea culpa on the war, which is commendable, and his support for a government-backed "green revolution" is an excellent idea (one that contradicts his newfound austerity passion). Still, he's about to do another major disservice to the American people. He may think it's wise and even inspirational to frame spending cuts as a form of national sacrifice. But the wrong people will be sacrificed,especially in this political climate The economists who signed today's statement understand better than Friedman does what will happen if austerity wins the day.

When asked what piece of fashion advice she would give, Catherine Deneuve suggested that women look in the mirror before going out and remove one piece of jewelry. Austerity-for-its-own sake is a bauble that makes its wearer look overdressed and leaves other people unclothed. We need to have the courage to invest in the future, rather than slashing spending out of political trendiness and a failure of nerve.

A lot of people are hurting right now. To let them languish would be Washington's way of telling them to "suck on this." But helping them would also help the economy recover and grow, which would benefit everybody. It would also send a message to them, and to the world, the this country still believes in its own future. It would be a signal of renewed confidence in the American Dream.

Sure, it will be hard work to turn things around, but it's like the old folks used to say: Hard work never goes out of fashion.

_______________________

*I am a fellow at the Campaign For America's Future, the Institute's sister organization.

(UPDATE: Yet another fashionista dresses himself in austerity chic as a journalist applauds.)

(UPDATE II: Via Glenn Greenwald, we learn that Digby told us of an an austerity-chic pioneer who can afford all the newest fashions.)

For more information on the statement, see here, here, and here.

Economists Warn Against Killing Growth And Jobs In The Name Of Deficit Reduction

Isaiah J. Poole — Thu, 16 Sep 2010 14:15:02 -0400

Authors and key endorsers of a statement warning political leaders of “a grave danger” that the still-fragile economic recovery will be undercut by conservative "austerity economics" give their views at a news conference call hosted by the Institute for America's Future.

Participating in the conference call were Robert Borosage, Co-Director, Institute for America’s Future; Dean Baker, Center for Economic and Policy Research and author, "Plunder and Blunder: The Rise and Fall of the Bubble Economy"; Teresa Ghilarducci, Schwartz Chair of Economic Policy, New School for Social Research and author, "When I'm 64, the Plot Against Pensions and the Plan to Save Them"; Robert Kuttner of The American Prospect and Dēmos, and author, "A Presidency in Peril: The Inside Story of Obama's Promise, Wall Street's Power, and the Struggle to Control our Economic Future"; and Robert Reich, Professor, University of California Berkeley and author, "Aftershock: The Next Economy and America's Future."

The statement and related content can be viewed at dontkilljobs.org.

Uncommon Common Sense About The Economy

Robert Borosage — Thu, 16 Sep 2010 13:53:51 -0400

Over 300 economists and policy analysts just released a statement warning the Congress and the Administration that bold action is needed to put people to work and get the economy going. The statement—Don't Kill Jobs and Growth in the Name of Deficit Reduction—was released by the Institute for America's Future (which I co-direct) and is available at http://dontkilljobs.org/

In the partisan election debate, with Tea Partiers ginning up hysteria about incipient socialism and out-of-control spending, the statement offers a series of common-sense propositions.

1. It is time for bold steps to put people to work.

We have an economy marked by faltering growth and mass unemployment. 30 million people are looking for full-time work. Poverty is rising. Companies are sitting on cash, unwilling to hire with no customers in sight. Families are still reeling from the loss of trillions in retirement savings and value in their homes. Rising trade deficits sap job growth. There are only four sources of demand in the economy—consumers, business, exports and government. With the first three nearly comatose, the fourth must act.

2. Grab this moment to rebuild America.

Everyone agrees that we have an decrepit and aging infrastructure. Collapsing gas mains, leaking sewers, falling bridges, shorted train switches, schools dangerous to the health of the children—we suffer it all around us. Much was built in the 1930s-1950s or earlier and has simply has worn out. There will never be a better opportunity to rebuild. Construction workers are idled and in need of work. Government can borrow at near record low interest rates. Anyone with a whit of business sense would see this is an extraordinary opportunity to rebuild America.

3. A premature turn to deficit reduction won't reduce deficits.

There is no clearer testament to the divorce of ideology from common sense than the position of House Republican leader John Boehner, who calls for cutting $100 billion out of domestic discretionary spending next year— nearly 15% of the total. This is lunacy. It will increase unemployment and slow growth. That in turn will reduce government revenues and increase costs in unemployment insurance, food stamps and other benefits. Austerity in the midst of a stagnant economy is more likely to increase deficits than to decrease them.

Surely we should not forget the lesson of 1937, when President Roosevelt, having reduced the unemployment rate from 25% in 1932 to less than 10% in 1937, was persuaded to move towards budget balance. The result was to cause the economy to contract sharply, sent the unemployment rate soaring, and drove us back into a recession solved only by the mobilization for World War II.

4. Building the new economy will help get our nation's books in order.

Even in the medium term, once the economy gets going, we should be focused on what is needed to create an economy that works for working people, not on austerity.

Consider the end of World War II, when we emerged with a wartime economy and debts of 120% of GDP, or about twice the burden they are now. Our leaders did not turn to austerity. They saw themselves, inescapably, "present at the creation" of a new economy. They passed the GI Bill and sent a generation to college or advanced training. They subsidized the conversion of defense industries to civilian production. They subsidized housing and built the suburbs. Eisenhower, a Republican president, kept top-end tax rates at 90%, put a lid on the military budget, and built the interstate highway system. The debt kept going up as an absolute number, but the economy grew, the broad middle class was created, and by 1980, the debt was down to 33% of GDP and not a problem.

We face the same choice. We can focus on balancing our accounts, or we can focus on building the new foundation for the economy—investing in education, 21st century infrastructure, research and development, making the transition to new energy, grabbing a lead role in the new green industrial revolution—and grow our way out of the hole we are in. One reflects a timid and frightened nation, worried about ordering its books before the takeover. The other a confident nation prepared to renew itself.

5. Don't fix what isn't broken.

As the economy recovers and people go back to work, we will have to pay for the investments we make. Some of this should come from warring on waste and new priorities, like axing subsidies to Big Oil, or cutting a Pentagon that spends as much as the rest of the world on the military. Some, at a time of Gilded Age inequality, should come from progressive tax reforms. Some can come from taxing what we want less of - like financial speculation, or excessive carbon use.

But it is critical to focus on what is broken and not on what works. We do not have an "entitlements crisis" despite all blather to the contrary. We have a broken health care system. Virtually the entire terrifying long term debt projections come from soaring health care costs. If we spent what the Europeans spend per capita on health care (with better health care results), we would project surpluses as far as the eye can see right now. Fix health care, and you fix any long term debt concerns. Fail to fix health care, and you can sack the government, we'll still go bankrupt.

Social Security, on the other hand, isn't broken. It hasn't contributed to the deficits—in fact, it has amassed trillions in surpluses to prepay for the boomers retirement. It contributes a negligible amount to long-term debt. Minor adjustments, such as insuring that those making over $106,500 a year pay the same rate as those making less, will solve almost all of long-term projected shortfalls.

6. Common sense shouldn't be so uncommon.

None of this is radical. Even the market fundamentalists at the International Monetary Fund are warning the U.S. against a premature turn to deficit reduction. Any honest investor would agree that this is a great opportunity to rebuild America. No one with any familiarity with the federal budget would disagree that it is health care costs that drive long-term deficits and terrifying debt projections.

And America's watchword is optimism, a belief that we can forge our own future. Have we become so timid or confused that we will now lower our sights, concentrate on balancing our books, and forgo making the reforms vital to creating an economy the works? I don't think so. It is a measure of how distorted our political debate has become that common sense is so rare. But what's the alternative? "Hell no, you can't," taunted Republican House minority leader John Boehner in the health care debate. Good theater—but it won't take us where we need to go.