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Our country is facing a jobs crisis. The Great Recession that began in December 2007 has been the deepest, longest and most devastating economic collapse since the Great Depression of the 1930s. And while the long-term unemployed are shouldering the heaviest burden, few Americans have gone untouched. Older workers have lost money in their retirement funds and are now forced to rethink their retirement plans. Families have lost their homes,leaving neighborhoods pockmarked with foreclosed properties. College students are watching their job prospects shrink and their debt mount.
Income for the typical American family never recovered from the 2001 downturn; in 2010, it was still $3,800 below its 1999 level. To put the current situation in perspective, by the end of 2011, the joblessrate had been above 8 percent for 35 straight months. That’s the longest period of sustained high unemployment since the Great Depression. The percentage of the unemployed who have been out of work for more than six months has been hovering above 40 percent, the highest since records began in 1948.
(During the deep recession of the early 1980s, the previous record, it peaked at 26 percent.) After four years, total employment was still down by more than six million jobs from its pre-recession level.
No sector of the economy has been spared the pain, but the impact on U.S. manufacturing has been especially great – largely because this downturn came on top of nearly a decade of steady job losses. From the beginning of the recession through the end of 2011, U.S. manufacturing employment has contracted by 14 percent. That’s the equivalent of one job in every seven.
It’s no mystery why this downturn has been so deep and intractable. Historically, recessions linked to financial crises – as was this one – take several years to grow out of. Add to this the fact that congressional Republicans have systematically blocked constructive policies, even as Republicans in state government actively pursue destructive ones. Spending cuts and layoffs at the state and local level have led to the loss of a quarter of a million public sector jobs over the last year, depressing overall job growth.
And even more fundamental reason for our current economic predicament goes back to the nature of the recovery from the last recession. The typical middle-class family entered the current downturn with less spending power than they had enjoyed in 1999. When the Occupy Wall Street movement popularized the idea of the 99 percent, they put their finger on the root cause of today’s jobs crisis. Over the years, as the benefits of economic growth flowed disproportionately to the top 1 percent, the resulting squeeze on middle-class incomes meant that growth was not sustainable. Imagine a pyramid turned upside down so that it rests, not on a broad base, but on its tip: That is not a stable structure, and yet it’s what the structure of our economy has come to resemble. With incomes for the 99 percent growing slowly or not at all, Americans financed a decade’s worth of spending out of their assets. chiefly, their homes. The bursting of the real estate bubble eliminated that option. And now, under water, underemployed and underpaid, middle-class consumers – the broad base of our economy – are neither able nor inclined to reach for their credit cards to spur the kind of demand that would lead businesses to invest and hire.
A crisis of this magnitude calls for a strong response. And when the crisis is rooted in deep economic inequities, it calls for a response that addresses the growth of inequality and the squeeze on the middle class. The American Recovery and Reinvestment Act of 2009 (ARRA) – the stimulus bill proposed by President Obama and enacted at the beginning of his term – stopped the economy’s freefall, saved many jobs that would otherwise have been lost, madeimportant investments in the nation’s productive infrastructure, and boosted the spending power of middle class and low-income workers. The consensus of independent economists is that the stimulus increased the size of our economy by 2.3 percent to 3.2 percent, and saved or created 2.4 million to 3.6 million jobs; without it, unemployment would have risen even higher. Despite efforts by the right to paint its $787 billion price tag as extravagant, it was actually quite modest relative to the size of the U.S. economy (roughly $14 trillion) and the depth of the recession (which most economists both inside and outside the administration underestimated at the time).
In an ideal world, as the magnitude of the recession came into focus, ARRA would have been followed by additional job creation measures. Unfortunately, obstructionist tactics by the minority in the U.S. Senate, followed by the shift to a far right majority in the House of Representatives after the 2010 election, blocked all but the most modest follow-up legislation.
President Obama’s “American Jobs Act,” which would create two million jobs through targeted tax holidays and hiring credits, investments in infrastructure, and additional funding to keep teachers and first responders on the job, has been broken into pieces and largely stalled. The “Restore the American Dream Act” proposed by the Congressional Progressive Caucus, which would create or save more than 5 million jobs over the next two years through investments in infrastructure and direct job creation, has been blocked from all consideration by House Republicans. Republicans in the House even sought to block extension of the Highway Trust Fund, which supports critical infrastructure repair and sustains hundreds of thousands of jobs.
Republican obstructionism extended to benefits for the long-term unemployed, which were delayed for seven weeks in the summer of 2010 and then, at the end of the year, held hostage for tax cuts for the wealthy. There’s no better illustration of the moral and economic bankruptcy of the naysayers. Extended benefits aren’t just a lifeline for the unemployed;they also support local economies by injecting dollars into the community, with one of the highest multiplier (“stimulus for the buck”) ratios of any policy option. (A dollar spent on unemployment benefits increases Gross Domestic Product (GDP) by $1.60. In contrast, a dollar spent to give tax cuts to the wealthy increases GDP by 40 cents.)
To support their claim that the budget deficit, not the jobs deficit, is our biggest problem, the “Party of No” has tried to link the two. They argue that a smaller government will somehow spur private sector job growth. Exactly how that is supposed to happen is not clear. The precarious employment outlook and the overhang of the financial crisis have left consumers reluctant to spend. Businesses, in turn, remain reluctant to hire – not because they lack the wherewithal (profits are strong and corporations are sitting on a record hoard of cash), but because they do not see a market for their products and services. Government has the ability to break this logjam – but first, we have to break through the budget deficit hysteria. The best way to address our long-term fiscal problems is to get Americans back to work.
As we push for a progressive job creation agenda, we will also counter the harmful myths of the right wing. First among these is the myth that balancing the federal budget through spending cuts will create jobs. With the country facing the worst unemployment since the Great Depression, the right wants to revive the policies of Herbert Hoover. In fact, budget austerity will dampen economic growth in the short term – leading, ironically, to higher deficits as revenues shrink.
A second myth is that cutting taxes for the rich and corporations will spur investment and jobs. This is merely the discredited “trickle down” theory of the 1980s revisited; it didn’t work then, and it won’t work now. U.S. taxes on corporations and the wealthy are already low compared to other advanced industrial countries, and relative to their historical levels here.
Neither corporations nor the rich are lacking in resources to invest. When strong middle-class demand creates market opportunities, investment will follow.
Another myth – that intrusive government regulations are responsible for high unemployment and low job growth – has been thoroughly discredited by researchers at the Economic Policy Institute. Not only does the economic research show no link between government regulation and any significant impact on employment, businesses themselves cite slack demand, rather than government regulation, as their most pressing current concern.
Most destructive of all is the myth that the way to create jobs is to cut wages and weaken unions through so-called right-to-work laws and other attacks on organized labor. Politics, not economics, is the real force behind such campaigns. They represent the response of the 1 percent to growing disquiet among the 99 percent.
We will continue to make the case for farsighted public policies to strengthen our economy through faster job growth and rising living standards for the 99 percent. President Obama’s American Jobs Act offers a positive contribution toward that agenda; Congress should pass it. In addition, the Congressional Progressive Caucus has proposed a strong package of job creation measures and sensible budget reforms that would create jobs now, while also improving the nation’s long-term fiscal outlook. Unfortunately, the House Republican majority
is refusing to even consider them. In the face of this obstructionism, we will be working with our progressive allies to build public support for action to address the jobs crisis. UAW job creation priorities are summarized below:
Extend aid for the unemployed. At a time of record long-term unemployment, extending unemployment insurance benefits for those workers who have exhausted their state benefits is essential. Congress’s failure to pass the American Jobs Act meant that as 2011 drew to a close, five million American workers once again faced the prospect of losing their benefits. With their loss of income would come the loss of 500,000 additional jobs from the negative impact on spending. After leaving for their holiday recess without passing an extension, House Republicans eventually backed down and passed a temporary, two-month extension of aid for the long-term unemployed.
Invest in our infrastructure. Fixing our nation’s deteriorating infrastructure is an investment in public safety and in our future productivity, energy security and competitiveness; it also creates immediate jobs. The American Jobs Act includes $50 billion to modernize our transportation infrastructure; $30 billion to modernize K-12 schools and community colleges; $15 billion to rehabilitate vacant homes and businesses; and $10 billion to capitalize a national infrastructure bank that would leverage additional public and private investment.
These investments are desperately needed, and Congress should pass them. They are also a drop in the bucket. The American Society of Civil Engineers estimates that merely bringing the nation’s surface transportation infrastructure up to a “tolerable” level will require an additional $94 billion each year for the next nine years.
Aid state and local governments. Job cuts in the public sector are depressing overall employment growth, while also jeopardizing the quality of public services. Aid to state and local governments that specifically targets layoff prevention and hiring is included in the American Jobs Act, and is something the UAW strongly supports.
Create public service jobs directly. We also support the direct creation of public service jobs, particularly in the nation’s most devastated communities – cities like Pontiac, Mich., where unemployment approaches Depression levels, and where many young people have lost hope of ever finding work. A modest program of job training and employment for low-income youth is part of the American Jobs Act, but we believe that more can and must be done to create jobs in hard-hit areas.
Create industries for the future. There is tremendous potential for the demand for clean energy to spawn new industries manufacturing new, more environmentally sustainable materials, technologies and products here in the United States. Supportive public policies – from President Obama’s courageous decision to save the domestic auto industry, to the advanced battery grants that were part of ARRA – have led to thousands of American jobs making the vehicles of the future. We support smart, targeted policies to revitalize American manufacturing by nurturing the development of other green industries.
Raise living standards for the 99 percent. Creating jobs on a massive scale is a challenge; ensuring that those jobs provide a high and rising standard of living is an even bigger one. But reversing the growth of economic inequality by defending (and expanding) the middle class is essential if our economy is to be put back on a solid foundation. A fairer and more progressive tax system can mitigate the lopsided distribution of rewards between the 99 percent and the 1 percent. The best way to strengthen the middle class, though, is to strengthen the voice of workers on the job and in society. And the best way to do that is by ensuring the right to organize and bargain collectively.
Closing the jobs deficit is our most urgent policy priority. Through a progressive program to put Americans back to work and ensure that the benefits of economic growth are broadly shared, we can strengthen the middle class and put our economy back on a solid foundation.