Five Washington Excuses for Ignoring the Jobs Crisis


"Slowly but surely we are moving in the right direction. We’re on the right track." ~ Barack Obama, Aug. 18, 2010

 

President Obama’s pollyanish comments coupled with Press Secretary Robert Gibbs’ outburst against "the professional left" reveal just how out of touch the Obama Administration is with the tens of millions of everyday Americans who are engulfed by the jobs crisis. Obama and Gibbs are miffed at liberal pundits for complaining about the Administration’s concessions on everything from health care and financial reform to jobs creation. But Obama’s real problem isn’t Arianna Huffington or Paul Krugman. For now, liberals have no place else to go–and they’ll never cross over to the Republican Party.

 

Instead, the Administration should be very worried about the more than 29 million Americans who have lost their jobs or are forced into part-time work. Unemployment is stuck at 9.5 percent–and that’s just the narrowest measure of joblessness. The more accurate Bureau of Labor Statistics jobless rate [1](U6) is over 16.5 percent. (This includes people who have stopped looking for jobs and those working part-time involuntarily.) Five workers are competing for every job opening while the average length of unemployment is over 35 weeks. If it weren’t for unemployment insurance and food stamps, we’d have Depression era soup kitchen lines going round the block.

 

Since the 1930s struggling workers like these have flocked to the Democratic Party, which they viewed as the party of jobs. Now they’re not so sure, and the party risks losing its mass base.

 

Our current unemployment trough, by far the longest and deepest since 1937, directly violates the social compact that glues together modern industrial societies — the tacit commitment that business and government will produce a full-employment economy. When that promise goes unmet for long periods, chaos ensues. It is not an accident that the rise of fascism in Europe during the 1930s corresponded with a prolonged period of high unemployment. Unfortunately, rearmament and war also are tools to put people back to work. Our political and business leaders are playing with fire by failing to seriously address the jobs crisis.

 

Wall Street gamblers tore an enormous hole in our economy, destroying 8 million jobs in a matter of months. Those jobs still haven’t come back and may never return. Therefore, it is the fundamental purpose of government to relentlessly attack the problem, just as we did during the Depression, with long-term funding to get people into decent, sustainable jobs. But instead of shouldering this responsibility, far too many politicians and public officials of both parties hide behind spurious arguments. Here are a few of the most outrageous:

 

1.   "The unemployed have only themselves to blame": It’s remarkable how many politicians and pundits argue that joblessness is sky-high because unemployed people haven’t developed "the skills they need to compete successfully in the 21st century." We expect that kind of twisted logic from anti-worker conservatives who think that unemployment insurance keeps workers from finding jobs (even if there are no jobs). But it’s downright pathetic when a Democratic administration sings from the same hymnal. Here’s Treasury Secretary Timothy Geithner [2] at the pulpit:

 

"The share of workers who have been unemployed for six months or more is at its highest level since 1948, when the data was first recorded, and we must do more to ensure that they have the skills they need to re-enter the 21st-century economy."

 

Dear Tim: Now that your Wall Street buddies have wrecked the economy and you’ve bailed them out, there are no jobs–except maybe for derivatives traders. What skills enable people to find nonexistent jobs?

 

2.   "Unemployment is a lagging indicator — the jobs are coming": The Obama Administration and Democratic Party leaders fall prey to their own version of trickle down economics when they argue that their mammoth Wall Street bailout and puny, short-lived stimulus program will bring back jobs for regular Americans (eventually).

 

Money was no object when it came to bailing out every bank and investment house that could possibly be put on life support. By some estimates the financial sector got over10 trillion in bailouts. Economists Nouriel Roubini and Stephen Mihm estimate that Goldman Sachs alone got60 billion in direct and indirect taxpayer largess. This huge cash infusion worked like a charm: Financial elites quickly got back to collecting fat bonuses and reopened their casinos, setting the stage for Financial Collapse 2. The Administration looked the other way.

 

Then came a modest stimulus package designed to prime the pump with tax cuts, public works bills and programs to quickly push money into the economy. The Administration hoped that this primed pump — plus a resuscitated financial sector — would bring unemployment down below 8 percent by the mid-term elections.

 

Unfortunately, that part of the plan didn’t work: The stimulus was far too small and diffuse to restore the millions of jobs that the financial gamblers had destroyed. We now need 22 million new jobs to get back to 5 percent unemployment. That’s a tall order — the equivalent of creating 640 Apple Computer companies, with 34,000 employees each.

 

3.   "We can’t afford a job creation program — it’ll increase the deficit": It’s certainly true that the deficit is growing rapidly as a result of the Wall Street crash and bailouts. But if we want the deficit to shrink, we’ll have to put people back to work so that they start paying taxes again. We also need to place a significant windfall profits tax on the very financial elites who wrecked the economy. We wouldn’t have a deficit problem if our politicians had the will to truly tax the super-rich — those earning3 million or more a year. (More on this below.)

 

4.   "US workers are overpaid. Cut wages by about 20 percent and the jobs will come back": Apparently many officials and business leaders actually believe this. Fed Chief Ben Bernanke, for example, argues that during the Great Depression, workers’ refusal to take more wage cuts during a period of deflation kept employers from hiring, driving unemployment to new heights. So…now that Wall Street has run off with the taxpayers’ money, the taxpayers need to live with less so they can have jobs. (Never mind that we’ve already stumbled through decades of stagnant wages.) Wage cuts indeed are badly needed — on Wall Street.

 

5.   "Government interference is creating uncertainty in the private sector and keeping companies from creating new jobs": The government haters, reinforced by the know-nothing Tea Partyites, really believe that if government would just leave private enterprise alone, it would generate jobs for all. Maybe these folks didn’t notice that the crash we just lived through happened precisely because the government let the free market run wild. It’s probably impossible to convince ideologues that the private sector can’t police itself or create millions of new jobs all on its own — even though we’ve known this for more than 80 years.

 

The Republican Party, hiding behind this ideology, hopes to see the economy collapse again so it can reap the rewards in November. (Might the giant Wall Street firms quietly engage in a capital strike to retard economic growth and help anti-regulatory Republicans recapture Congress? No, they wouldn’t do that… Would they?) The Republicans are hoping that by the time they take power again, the economy will quickly right itself and they can take the credit. That and the Tooth Fairy will bring us new jobs. The Republicans are playing a very dangerous game that is likely to worsen an already severe jobs crisis and send our nation into uncharted and dangerous territory.

 

We can’t tackle the jobs crisis until we’re willing to tackle Wall Street. Both Democrats and Republicans have stood idly by as the wage gap has turned into a Grand Canyon of inequality. (In 1970, the top 100 CEOs made 45 times more than the average worker; in 2008, they made 1,081 times more. See The Looting of America [3]) Almost no one in Washington has the nerve to challenge Wall Street’s socially useless and reckless financial games. They’re afraid to say that it’s wrong that the top 25 hedge fund managers made as much money during 2009 as 658,000 teachers [4] — or that the top ten hedge fund managers "earn" $900,000 an hour [5]. The money for job creation is right there, in the hands of the elites who profited so handsomely from the financial meltdown they helped create.

 

The American people are hungry for proposals to rectify this injustice. Why not turn Wall Street’s ill-gotten gains into programs that put our people back to work? Here’s a plan we’ll probably never hear from Democrats, Republicans or the Tea Party:

 

Place a windfall profits tax on the super-rich who profited from our bailouts to pay for the jobs that these gamblers destroyed.

 

Call it a windfall profits tax or a financial transaction fee. But really it’s reparations, long overdue. Tens of millions of Americans are suffering through no fault of their own. These working people didn’t buy houses they couldn’t afford. They didn’t gamble their life’s savings on derivatives and securitization.. They just went to work one day and were told their job was gone. They came home to find their neighborhood disintegrating as the housing bubble burst around them. All thanks to reckless financial games on Wall Street.

 

Unless the Obama Administration finally organizes a major assault on the jobs crisis, there will be no relief for Mr. Gibbs or his boss. Many angry Americans — liberals and conservatives — will turn against the party in power.

 

Too bad we no longer have a real Party of Jobs to support.

 

Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It, Chelsea Green Publishing, June 2009.

 

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