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Time to focus on jobs and growth
Robert Reich
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Kai Ryssdal: We know a little more today about how the next round of the budget fight is going to shape up. The GOP named its members of the super committee that's supposed to agree on $1 trillion-plus in federal budget cuts.
Commentator Robert Reich says the problem isn't just a failure to compromise. It's that it takes our eye way off the ball.
Robert Reich: We're slouching toward a double dip because we're getting the problem wrong. We're not in a debt crisis. Our current crisis is jobs, wages and growth.
The economy is almost at a standstill, with almost no growth in the first half of the year. Although Friday's job report showed 117,000 new jobs in July, that's not enough to keep up with population growth, which means even more people have stopped looking for work.
A smaller percent of adult Americans is now working full time than in almost three decades.
The Fed cannot boost the economy by itself. Its near-zero interest rates haven't worked to date and there's no reason to suppose they'll work any better in the future.
We also need an expansive fiscal policy. Yet last week's budget deal makes it politically harder to enact the stimulus we need. There's a huge gap between what increasingly scared consumers are willing to spend and what the economy could produce at or near full employment.
Republicans continue to claim the original stimulus didn't work, but revised data show the drop in 2008 far greater than assumed. The economy plunged 8.9 percent in the fourth quarter of 2008 -- the steepest quarterly decline in more than half a century. And in 2009 household buying contracted more than it has in almost 60 years.
So, the original stimulus was way too small to offset this. With cash-starved state and local governments simultaneously scaling back their own spending, the stimulus needed to be even bigger.
The only hope now is voters will tell their members of Congress, who are on recess back home, to enact a bold jobs plan to jumpstart the economy. The government can now borrow money more cheaply than ever and use it for our roads, bridges, ports, parks, schools and everything else that's being neglected -- including more than 20 million Americans who want and need work.
Ryssdal: Robert Reich was secretary of labor for President Clinton. His most recent book is called Aftershock: The Next Economy and America's Future. Next week, David Frum. Send us your comments -- click on this contact link.
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Cut taxes. Cut Regulations. Stop the crippling strangling, NLRB and EPA. Encourage Right To Work States... Robert Reich is a brilliant man and eloquent speaker, but he is in debt to the Unions and the Democratic party. He wants more of the same - oppressive, big government, control. We need to free up individuals and the economy.
I'm still puzzled at the folks insisting that the problem is debt and taxes. The Reich approach is pretty standard Keynes. Demand is low because consumers have little or no money and are concerned about their jobs, if they have them. Corporations are sitting on 2.5 trillion dollars in cash, but are quite logically unwilling to invest in production because there are no customers. There is little that would change this if government were left out of the equation. Bring in the feds, spend money (yes, borrowed money. That 2.5 trillion can be put to work with treasury bonds, at least) on infrastructure and energy efficiency, things we need in the long run anyway. BUT it has to be large enough to knock unemployment down and turn the mood of consumers. When they start feeling more comfortable with their long term position, they'll start buying and companies, again logically, will start investing in production to make a profit off of these potential customers. Simple, albeit expensive in the short term. Supply side says the problem is that the wealthy/job creators don't have enough money to work with. (2.5 trillion not enough to cover costs, apparently.) Or are concerned about all those taxes (which are at their lowest point in 50 years.) Or are spooked by the debt (which is not out of line with debt over the last 20 years, during which we had both boom and bust times.) There is no inherent logic in supply side economics aside from the standard "Why make money when the government will just take it from you" nonsense that doesn't stand up to the basic light of current taxation levels. Yes we have a debt problem caused by both overspending and undertaxing. (Yes, undertaxing. We have some of the lowest tax rates in the industrial world.) When we get out of this ditch we should definitely start working on both of those issues. But we have to get out of the ditch first.
The majority of comments posted hear bemoan something I have suspected for a long time: Americans have lost their ability to solve problems. Or, more precisely, Americans no longer listen to those that know how to solve problems. Prof. Reich has given us a very obvious solution for an interim fix in unemployment that will yield payback in the future. Further, those comments lamenting entrepreneurship obviously have forgotten the KEY element of entrepreneurship: ENTREPRENEURS. Where on earth do you think they come from? You think they live and work for Google? Do you think Larry Page and Sergey Brin were worried about the corporate tax rate when they invented their search engine? Who are you going to credit the creation of jobs in Google to? Google itself, or the facilitation of its inventors, but for whom the company would not have even existed in the first place? Further, Prof. Reich has also explained why corporations have utterly FAILED to create jobs over the past 2.5 years: NO DEMAND.
Professor Reich, in his assessment of the problem is absolutely correct: it's jobs, Stupid! Debt is a problem, but it is not the current one. Without jobs, you don't have enough economic activity to collect enough tax revenue to pay off the bill. Remarkably, conservatives and Republicans will espouse the wisdom of treating the United States government as a business, but they will not apply that idea in practice. The country is a business that is not making enough income, with outdated equipment and employees who are not educated in relevant technology. There are only two ways to go: 1) retool and update your equipment and your workforce, or 2) quit and declare bankruptcy. Unfortunately for the United States, quitting or declaring bankruptcy is not an option (or at least not one that most of us would be willing to accept).
Finally, the notion of government's inability to innovate and create jobs flies in the face of FACTS: the space program, the Interstate Highway System, the Intercontinnental Railroad, our electricity system, DARPANET (now known to you as the "Internet"), free vaccinations for polio, just to name a few were all GOVERNMENT funded ventures that have yielded more returns than any private sector company ever has. In fact, many a private sector company (e.g.,Apple and Google) have piggy-backed off the government's work to their own prodigious success.
Finally, to those that keep harping on the "taxes are the problem" train: we've tried it. Apparently unbeknownst to you, HALF of the "stimulus" money was in TAX BREAKS. So, if you're theory of job creation is correct, that should have worked. But it didn't. We haven't actually tried to get people employed directly by the government to work on infrastructure projects; let's give it a shot. If that doesn't work, then you are welcome do your "I told you so" dance in your energy independent home while surfing on your new and improved broadband.
A Fair Tax, which is something like a VAT Tax. hmmmm.... If I'm not mistaken, doesn't Europe use this VAT tax concept... Aren't they in more trouble than we are?
I agree that stimulus (as we are doing them) doesn't get the job done.... what is also true is that we've had near a decade of lower and lower taxes on the job creating wealthy and corporate organization have an unending wealth of exemptions....
SO WHERE ARE THE JOBS?
Perhaps neither extreme works?
What the 112th Congress just doesn't get is that we - America - like it or not - is part of a world economy... every time we tweek something to make it better for America, the world is going to quickly figure out what to tweek to counter balance what we just did.
The only way jobs are going to come back to the USA is if the USA is the most economical place to perform that job...
It IS about wages...
it IS about the cost of labor..
It IS about the cost of raw materials
It is about the cost of organizing the work site
It is about the cost of transporting people, goods, and anything else to that work site,
It IS about productivity..
It is about a LOT OF THINGS..
and getting all those things in the right balance requires moderation ... not extremes..
Those of you focused on "How to create jobs" are in the right place.. I don't think anyone knows the answer though. At least not yet...
One start might be to ... toss the entire 112th out on their bottoms and elect a whole new set of folks to look after the government. You can toss the Pres too if you want... The current occupants of DC simply are not getting the job done... including the tea folks..
Robert Reich deserves respect for being in public service as the Secretary of Labor, but stating the obvious is easy, more jobs. Details? Spend money on non-competive infrastructure or green jobs that make us non-competitive in the long run. What he should have said, what would reasonate with America is to fix the leadership in Washington first. Our President is very gifted, but he wastes his talent on holding on to the extreme left position of his party. He needs to let them go so he can use his talent and help America. First, dump Harry Reed as Senate leader, he can stay on the bus as his party bull dog, but not Senate leader. Boehner is in the right seat and with a better Senate leader his team can start to work. It is a failure of America that it needs nuclear options to work, like the gang of 12 who have till Novemeber to plan a trillion plus spending/revenue cut. Really, is the what America wants to show for leadership? President Obama is the head of the party, he should be able to get this to work. With a more reasonable Senate he could work his skills to work towards consesus and get our leadership moving effectively. It would give confidence to the world that America's ship has executive officers on-board. Does this reasonate with anyone out there? If he doesn't use his gifts, he will have Hooversville on his doorstep as a one term president. Next, get the American engine running. We got lots of natural gas, pour on cheap energy. Forget about the cataytic converter, go for cheaper energy and let the American engine roar! We can add it later. Housing problem, Fanny and Mae hold a lot of empty building. Bulldoze them to the ground. What you say? Hey after we won WWII (with allies), we dumped the jeeps and equipment into the ocean. Why? So we wouldn't have a glut of vehicles in the states to kill car manufacturing. Bernake could print the money to cover bad debts and it wouldn't cost us a dime or mater overall. Left liberal will scream about the waste, but people need to work to get things, not sit on their rears and have free housing come to them. We can get this engine going to be the wonder of the world right now. It is within our ability to do it. We have the talent in Washington, our people, this blessed nation. We just need to clear the clogs in the wheels and get moving.
The market is obviously not agreeing with Reich. If we don't have a debt problem why is the market fleeing to the Swiss franc and gold? Why is the US dollar teetering on the verge of extinction as the world reserve currency. The game is over, we don't need anymore Keynesian nonsense from Robert Reich. It is high time that Marketplace start presenting a counter argument to Reich because he is sounding like a clanging bell that we are ignoring. More of the same...money out of thin air will save you....not!
Reich is half right. If the economy can get moving, the deficit will take care of itself. Unfortunately, he is still stuck in the borrow, spend, borrow, spend rut, which has only made things worse. Can the government actually do anything to get the economy going? Given the corrupt and wasteful way that the government operates, we should pray for more gridlock.
Monique,
What you describe is called a command economy and it doesn't work. The only true economic growth is generated by the private sector taking risk. Yes, there is a place for government to establish a set of common rules and enforce them as well as to solve the problem of the commons, i.e. build (useful!!) infrastructure, but that's where it ends. John is 100% right that a Fair Tax is one of the few things the government could do that would be effective in promoting job growth and making the economy more efficient. Why do we tax repatriated profits? All that does is encourage businesses like Google to keep most of their capital abroad and invest in foreign economies. A Fair Tax would either increase investment in the US or allow companies to return their overseas profits to their shareholders to be spent or used in large part in the US. It would also encourage saving and investment and not simply the mindless, credit-driven consumerism that was so perfectly exemplified by subprime borrowing.
Oh, and the only way Germany is going to wean itself off of fossil fuels is to either recant their nuclear position or buy even more power from (nuclear) France. Renewables are not practical for baseload power and won't be for decades to come, if ever. For anyone who would like to debate this I encourage you to research a little on just what is happening with rare earth prices...
Let's see, the US doesn't have a fiscal problem, but instead only has an economic problem. All we need(ed) to do is(was) borrow even more money to prime the magic job pump. Seriously? Does anyone besides Reich or Krugmann truly believe that we simply didn't spend enough on the stimulus? Perhaps the worst part of this entire piece was Reich's contention that because interest rates are low now we should simply borrow as much money as we want to buy jobs for all of those unemployed today. There's only one slight problem with that logic and it's the same problem that burst the subprime bubble. Since Reich has no intention of solving our fiscal problems aside from attempting to grow out of them --how supply side of him!-- in effect all of that new borrowing would be done with an interest-only loan. Since we're not going to pay down the principle of that loan, then at some future point we will have to roll over that debt. Does Reich believe that these rates will be low indefinitely? And, of course, Reich has no intention of ever solving the runaway expenses of the entitlement state that his party gifted to untold future generations. No, the reality is that the country has just endured two bubbles: the internet bubble of the vaunted 90's followed by the even bigger housing bubble of the 00's. America isn't spending because America is over leveraged and that can only be healed by time. Keynes is dead. Let the worms have him.
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