Inaction by Congress Deepens the Jobs Crisis
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After months of modest gains, the U.S. economy lost 125,000 jobs during June. That’s the worst jobs-related news this year. Without serious action soon, the struggling U.S. economy is going to get even uglier. Unfortunately, President Barack Obama’s economic team was slow to recognize the severity of the jobs crisis, and now seems unable to get Congress to actually do something about it.
As David Corn notes for Mother Jones, the recent jobs data is actually much worse than the 125,000 figure implies:
“The economy needs about 150,000 new jobs a month to keep up with population growth and new entries into the jobs market. It needs a lot more than that to make up for the 8 million or so jobs lost in 2008 and 2009.”
Although the economy sluggishly recovered from the catastrophic events of late 2008, economists are warning of a “double-dip” recession in which mass layoffs return. So why is Congress refusing to deal with the jobs crisis in the face of such terrible economic conditions?
Part of the problem, Corn notes, is that Obama didn’t do a very good job selling his economic stimulus package to the public. The bill, which Obama pushed through in early 2009, really did improve the economy—it’s the only reason why the unemployment rate is hovering around 10 percent instead of 12 percent or 13 percent. But by refusing to counter Republican attacks on so-called “wasteful spending” included in the package, Obama failed to show the public how much good the stimulus has done. Instead, the bill is widely perceived as another wasteful giveaway to special interests and akin to the bank bailout.
Spending is stimulus
In reality, government spending is the best way to stimulate the economy during a deep recession. It makes up for the shortfall in spending from consumers who have lost their jobs.
There are all kinds of ways the federal government can spend money to create jobs, including extending unemployment benefits to laid-off workers, providing funding to states to allow them to hire more teachers and cops, and hiring people to build roads and buildings. The government did all of these things with the stimulus package from early 2009, but it didn’t do enough of any of them. The stimulus package was simply spread to thin.
Roots of recession
As Robert Reich explains for The Nation, the recession itself was created by deep economic inequality. By 2007, the wealthiest 1 percent of Americans made 23.5 percent of the nation’s total income. Figures like that had not been seen since 1929, when the richest 1 percent made 23.9 percent of the nation’s total wealth. All of this concentration at the top means that the elite enjoy a disproportionate share of economic gains, but it also sets the entire economy up for massive shocks.
When the rich have all of that money, they have to invest it somewhere. When the majority of citizens are seeing sluggish wage growth, or even a drop in wages, as the U.S. experienced during the Bush years, there aren’t enough valuable assets out there that can absorb that investment. As a result, rich people put their money in speculative asset bubbles. When those bubbles burst, the entire economy can come crashing down, as it did in both 1929 and 2008.
Rampant inequalities around the globe
As Melinda Burns highlights for AlterNet, rampant inequality in not unique to the U.S. More than half of the world’s population lives on less than $2 a day, and decades of conservative economic policies have been unable to reverse that hardship.