The President's Job's Initiative Doesn't Measure Up, by Robert Reich: Barack Obama is trying once again for balance. On the one hand, he wants enough government spending to offset the timid spending of consumers and businesses. Otherwise, the jobs and wage recession could drag on for years. On the other hand, he doesn't want to set off more alarm bells about the budget deficit. Otherwise, conservative Democrats might join forces with Republicans to block heath care. So what does he do? A little bit more stimulus spending, but stimulus spending that doesn't look like more stimulus because it's not really adding to the deficit. It's coming out of savings from money already authorized to be spent on the bank bailout. Hmmm?
No president in modern times walks a tightrope as exquisitely as this one. His balance is a thing of beauty. But when it comes to this economy right now -- an economy fundamentally out of balance -- we need a federal government that moves boldly and swiftly to counter-balance the huge recessionary forces still at large.
States and cities, for example, are estimated to be $350 billion hole this year and next. They can't run deficits so they're wildly cutting spending, cutting jobs, cutting contracts, and raising taxes and fees. That's a huge anti-stimulus package roughly as big as the remaining direct spending in the old federal stimulus package. Which means, Obama's "new" stimulus, announced today, is about all we have, and it's not nearly enough.
The word in Washington is we're out of the woods. The rate of unemployment dipped from 10.2 percent in September to 10 percent in October. In our nation's capital, a one-month trend marks a turnaround. Don't believe it for a moment. The real story of October was the increasing number of Americans who dropped out of the labor force, too discouraged even to look for work.
Main Street is hurting worse than ever. Ten percent unemployment translates into roughly 18 percent of our workforce unemployed or underemployed. Housing markets are in terrible shape... A quarter of all American children are now dependent on food stamps.
There is no reason to tolerate this degree of misery. We know exactly what to do. The government has the fiscal tools to do it. Start by bailing out state and local governments... Renew unemployment and COBRA benefits. Increase federal spending on infrastructure. If we have to, hire people directly. The package should be $400 billion over two years.
We don't know exactly how much the President is proposing to spend, but sources tell me it's in the range of $70 billion, redirected from the $200 billion in TARP savings. ... This isn't really balance at all. It prolongs the economic imbalance.
A jobs program that is too small is politically dangerous. If unemployment is still a big problem even after this program is in place, it will look like two separate programs -- which in their totality are not large enough to get the job done -- have failed to generate new jobs. That's not only costly in this recession -- people who could be employed won't be -- but it will also undermine the case for similar programs in the future. This removes an important policy tool from the government's arsenal, even though a jobs/stimulus program large enough to make a dent in the problem would likely work.