Wednesday, September 7, 2011

What President Obama Should Do About Jobs

There has been a lot written about what President Obama should say in his speech this coming Thursday.  There has been speculation for weeks, because the continuing high unemployment attests to the inadequate 2009 stimulus.  It has been argued that the ARRA of 2009 merely shifted employed individuals form one job to another and I have stated many times that the construction stimulus merely kept construction workers employed, but the ugly fact is the unemployed are staying unemployed and the older the unemployed individual the less likely they will find employment as they are subject to not only the discrimination of being unemployed but of being older.  Surveys of the unemployed show they are losing hope and see a dismal future not only for themselves but for the country and their children.  Aggregate demand is contracting and where there is no demand or less demand you do not find job creation.  With the growing economic indicator evidence that the U.S., European, and global economies are slowing down to crawl, pre-recession speeds, unemployment is poised to increase if not surge upon any economic shock.

Many commentators have been dismissive that the President will say anything meaningful, while others have weighed in with their opinions as Warren Mosler did in a post and Robert Reich did in this post. Let me tell you what I think President Obama should do and then I will tell you what I think he will do.

Create an infrastructure program which is ongoing to address the inability of cities and states to build and maintain roads, municipal and regional transportation systems, bridges, schools, sewer systems, and water supplies.  Water, in particular, is becoming a valuable and increasingly scarce commodity.  This will keep construction workers busy and reduce future infrastructure maintenance costs.  No significant new immediate jobs here and it will take one to two years to begin.

Create a government run program to restructure underwater home mortgages to reflect true value and get the housing market moving through the FHA and bankruptcy laws.  Depressed housing prices are a significant factor in the very slow economic growth and deflation.  The current program run through banks has a well documented record of failure and delay.  It needs to get done.

Provide funds, perhaps in the form of loans, to local governments and school systems to insure adequate police, fire, and teaching staffing is maintain for the safety and to insure an adequately educated youth for future growth.

Increase Social Security and Medicare payroll "taxes" to apply to all levels of earned income.  Social Security is not an entitlement, it is a pension in the form of deferred compensation and the top income level for contributions has never been inflation adjusted.  At some point in time, it will have to be admitted that the totally inadequate PPACA will have to be folded into an expanded Medicare program for everyone, because health care is a right to life and denial of adequate health care is ultimately murder.  Payroll tax cuts have little economic stimulus effect as it is little noticed by workers in their paycheck and people are saving and paying down debt not splurge buying; business tends to save tax reductions rather than spend when demand for their services and products have not increased.

Concentrate on efficiency cuts in government.  Government exists to provide services to its citizens.  It is one thing to provide services and another to provide them efficiently.  Any business can tell you this.

Create a National Job Corps.  This is the only way to create jobs now. It has worked in the past and it can work more efficiently now

Extend unemployment to those who have lost part-time jobs.  Many people, according to the unemployment statistics, are captive to involuntary part-time employment, because they cannot find full time positions. The loss of a part-time job can be devastating.  With a National Job Corps, unemployment benefits should be temporary transition funds only.

Unfortunately, the political debate within the U.S. is dysfunctional.  The two political parties are engaged in opposition at all costs with a President who holds personal deficit hawk views and who is timidly attempting compromise when, if the President proposed the opposition party's political platform, he would be opposed by that very same party.  The President needs to lead and let those who vote against jobs reap the harvest of their constituency at the next election. This political dysfunction and the President's personal deficit cutting sympathies has lead the President and his advisers to flounder economically as they seek politically acceptable policies which do little or nothing rather than what needs to be done.  These political concerns have caused the President and his advisers to court the wrong constituency.  The economic crisis is not debt; it is jobs and income inequality.  The wealthiest top 1% of the population have too much power as can be evidenced from no banker going to jail for the mortgage frauds or engaging in financially and systemically (globally) dangerous trading and business activities.  In fact, we bailed them out financially.  In a period of aggregate demand contraction (less consumer and business spending), government is the spender of last resort.  When politicians stop an economy from growing with deficit cutting at the wrong time, the economy tanks and misery sets in.  If you are one of the wealthiest 1%, you suffer, but you also benefit from opportunities for more control and wealth.

I expect President Obama to announce spending cuts.
I expect him to propose incentives to businesses to hire workers.
I expect him to announce a job training program in which workers are trained on the job and the government pays them, much like the State of Georgia is doing and nothing like what Germany does. 
I expect him to announce an infrastructure program to build schools.
I expect him to appeal to bipartisanship.
I would not be surprised if he broached the subject of cutting/modifying Social Security and (maybe) Medicare.
I expect him to say, like Hoover, what the financial/banking sector wants him to say.
I expect the amount to be inadequate, say only $300 billion, covered by spending cuts.

We deserve better.

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