Focusing more on fixing unemployment and the deficit

Hundreds of job seekers line up to enter a career fair in Denver, Colo.

Kai Ryssdal: All right, so to recap. Even after today's unemployment report, we're still down about 7 million jobs from the start of the recession. On the other side of the economic balance sheet, there's a federal budget deficit that runs more than $1 trillion this year alone -- total federal debt runs 14 times that.

Which brings us to Christina Romer. She chaired the Council of Economic Advisors for the first two years of the Obama administration. Now she's back teaching economics at UC Berkeley. But she's been very public lately about saying the administration has to do more to create jobs and take care of the long-term deficit. When we spoke, I asked her about that, whether government stimulus and cutting down debt at the same time doesn't seem a little inconsistent.

Christina Romer: The way that you square the circle is to say, they all need to be part of a comprehensive package, and that's not at all a crazy thing. If you look at one of the alternative deficit commissions, the one chaired by former Senator Domenici and former CBO director Alice Rivlin, they said let's start with a big payroll tax cut in 2011 -- that's what you do for jobs -- then as we start to recover, what's the range of serious things that you do to get our long-run deficit under control? That's a sensible, comprehensive package that deals with both problems, because the longer unemployment stays high, the more likely it is to stay permanently higher. And that would be not just a disaster for people, but for the budget deficit as well.

Ryssdal: Do you still talk to people on the political side of things in Washington, not just your economic colleagues, but people on the Hill?

Romer: I certainly do love to keep up with the team in the White House, but no, I'm not talking to Congress and things the way I used to.

Ryssdal: Well, the reason I asked is because, as you know, we're having some disagreement in Washington about how to handle the deficit and what to do about it. And I'm wondering what your sense is of any realistic possibility that any of these ideas that you have mentioned, or others on deficit commissions have mentioned, might actually come to fruition?

Romer: Yeah, the one thing I will say is we saw 64 senators say we need to do something about the long-run deficit; that's certainly showing you that there are a lot of political players that feel as I do that this is a really important issue and something that we need to be dealing with. I understand this will be incredibly hard. A lot of things are incredibly hard, but you have to do them.

Ryssdal: I do seem to recall when you were running the Council of Economic Advisors, that when the jobs numbers would come out, as the unemployment rate inched above 9 percent and then hit 10 percent, you would come out and do morning talk shows on the lawn of the White House there, and the gist of your comments would be, 'listen, we're really trying but it's hard to get jobs done and taken care.' So what could have done -- had you something to do over, what would you do over?

Romer: You know, we were always talking about things that we would do, and that's part of why we certainly took aggressive action early on with the Recovery Act and the financial rescues; it's why we took a number of smaller measures as we went on, everything from a small-business jobs bill to extending unemployment insurance. I think there was potentially a chance to be more aggressive maybe in the fall or winter; fall of 2009. I think that's where maybe lots of policymakers took their eye a little bit off the jobs ball. We saw the feds talk about exit rather than what more can we do? And I think Congress certainly was not interested in doing much more on jobs. I think all of us could have pushed harder and should have pushed harder.

Ryssdal: What needs to happen right now, though? Your name is on two very high-profile letters out there calling for more to be done on jobs and more to be done on the deficit. What has to be done? What do you want to see happen?

Romer: Right now, we're on this terrible trajectory of everybody's talking about the 2011 budget and talking about cutting spending right now, and that's exactly the wrong policy. It's wrong for jobs, and it doesn't do anything about the long-run budget deficit. What we need is a much more sensible whole package that says, do some more for jobs now but pass right now -- so everyone knows what's in place -- how we get the deficit down over time. Believe me, I certainly know it's hard and again, that doesn't mean that it isn't worth thinking very hard about what are the things that would have the highest bang for the buck. That's part of why I'm very taken with payroll tax cuts for employers, because that both has an aggregate demand component -- it just cuts taxes -- but it also has an incentive component, it lowers the cost of hiring a worker. And hiring is exactly what we need them to do.

Ryssdal: Christina Romer is a professor of economics at the University of California, Berkeley. Until a year or so ago, she was the chairwoman of the Council of Economic Advisors at the White House. Dr. Romer, thanks very much for your time.

Romer: Sure, thank you.

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Loyalty does not earn sustained employability. As businesses, universities, states, counties, cities worldwide stumble through the recession some find themselves in a phase of creative disassembly. Hundreds of thousands of jobs are shed. World class University of California Berkeley Chancellor Birgeneau ($500,000 salary) and his $3 million outside consultants is firing employees via his “Operational Excellence (OE)”: 2,000 axed by end 2011. Yet many cling to an old assumption: the implied, unwritten management-employee contract.

Management promised work, upward progress for employees fitting in, employees accepted lower wages, performing in prescribed ways, sticking around. Longevity was good employer-employee relations; turnover a dysfunction. None of these assumptions apply in the 21 century economy. Businesses, universities, public institutions can no longer guarantee careers, even if they want to. Managements paralyzed themselves with a strategy of “success brings successes” rather than “successes brings failure’ and are now forced to break implied contract with employees – a contract nurtured by management that future can be controlled.

Jettisoned employees are discovering that hard won knowledge earned while loyal is no longer desired in employment markets. What contract can employers, employees make with each other?

The central idea is simple, powerful: job is a shared partnership.
• Employers, employees face financial conditions together; longevity of partnership depends on how well customers, constituencies needs are met.
• Neither management nor employee has future obligation to the other.
• Organizations train people.
• Employees create security they really need – skills, knowledge that creates employability in 21st century economies
• The management-employee loyalty partnership can be dissolved without either party considering the other a traitor.

Sustained employability in the 21st century economy for management and employees.

There is a largely unproven assumption underlying the lowering of payroll taxes to stimulate job hiring: that consumer demand is high enough to cause employers to hire another employee to increase their business's output to meet the demand. But, there seems to be an inherent logical fallacy in this, namely that if demand is high, then businesses would naturally be hiring more to meet that demand. Add to this other going concerns, such as access to credit and future economic stability, and hiring just doesn't seem like what will result from yet another tax cut program. Instead, the government, through tax policy, should attempt to stimulate demand in productive areas that are yet untapped, like infrastructure investment, or alternative energy programs. The other problem with the tax cutting approach is paying the bill later: everyone is willing to cut taxes, but no one seems willing to increase them anymore when the good times come back.

The House budget for FY2011 will cost jobs of people involved with the programs being cut, including federal, state,and private sector employees. (Job retraining programs would also be cut.) Yet Speaker Boehner says his bill will create jobs. Do you think he is consciously using the "big lie"propaganda technique, i.e., make the lie so outlandish that people will think he wouldn't say it unless there was at least a grain of truth to it? This would not be the first time the GOP spin machine claims for their side the argument the opposition was making.

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