Vision: How to Get America Back to Full Employment
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This is the lead article in a forum on the possibilities for full employment in today’s economy.
Employment conditions in the United States today, in the aftermath of the 2008–09 Wall Street collapse and worldwide Great Recession, remain disastrous -- worse than at any time since the Depression of the 1930s.
Since Barack Obama entered office in January 2009, the official unemployment rate has averaged more than 9.5 percent, representing some fifteen million people in a labor force of about 154 million. By a broader definition, including people employed for fewer hours than they would like and those discouraged from looking for work, the unemployment rate has been far higher -- 16.5 percent, on average. Still worse, if we count people who have dropped out of the labor force, unemployment would rise to nearly 20 percent, or 30 million people, roughly twice the combined populations of New York, Los Angeles, and Chicago.
The first major act of the Obama administration was the economic stimulus -- the American Recovery and Reinvestment Act -- which focused on fighting the recession and mass unemployment. This $787 billion program of tax cuts and government spending measures aimed to brace the economy’s rickety floor and thereby preserve existing jobs as well as generate new ones in both the public and private sectors. The stimulus program did succeed in preventing a full-scale 1930s-style depression. A Wall Street Journal survey found that 75 percent of economists agreed that the stimulus succeeded in reducing unemployment. A detailed study by Alan Blinder, a Princeton economist and former Federal Reserve Vice Chair, and Mark Zandi, Chief Economist at Moody’s Analytics and an advisor to John McCain’s Presidential campaign, found that unemployment would likely have risen to nearly 17 percent in the absence of the stimulus.
But the stimulus has clearly proven inadequate for fully reversing the effects of the Wall Street collapse. Combined with the huge decline in tax revenues tied to the recession, the stimulus spending has also generated federal fiscal deficits of a magnitude the United States hasn’t seen since World War II -- around $1.4 trillion in 2009 and 2010, or 10 percent of GDP each year. Bringing the U.S. economy, along with most of the rest of the world, out of the deep ditch into which Wall Street has shoved it will clearly be a long, hard struggle.
New rounds of major job-generating measures are crucial to the task of reversing the recession and driving down unemployment. These measures will involve both government spending and, equally important, financial-market regulations and incentives intended to force credit markets away from hyper-speculative practices and toward productive, high-employment investments. Such proposals fly in the face of the rising mantra in Washington and Europe in favor of fiscal austerity and business deregulation.
But beyond the challenges in advancing such short-term programs, there is a broader and longer-term goal that is not even on the agenda: creating and sustaining a full-employment economy in the United States. Especially at this historical juncture, as we attempt to grope our way out of the Great Recession and onto some kind of new growth trajectory, we need to be clear on the centrality of full employment as a policy goal. That is, we need to think about what exactly we mean by full employment; on why, properly defined, full employment is so fundamental to building a decent society; and on what kind of longer-term policy innovations will be needed both to get the U.S. economy to full employment and, once there, to stay. Success in answering these questions will necessarily engage large numbers of people coming at the issue from a wide range of perspectives. My proposals here are aimed at energizing this broader debate in fresh and constructive directions.