The Zero Economy

obama sotuThe Bureau of Labor Statistics reports today no jobs were created in August. Zero. Nada.

Well, not quite. The strike at Verizon reduced the labor force by 45,000. Minnesota government employees returned to work, adding 22,000. So in reality, America lost 23,000 jobs. Almost zero.

In reality, worse than zero. We need 125,000 a month merely to keep up with population growth. So the hole continues to deepen.

Since this Depression began at the end of 2007, America’s potential labor force – working-age people who want jobs – has grown by over 7 million. But since then the number of Americans with jobs has shrunk by more than 300,000.

If this doesn’t prompt President Obama to unveil a bold jobs plan next Thursday, I don’t know what will.

The problem is on the demand side. Consumers (whose spending is 70 percent of the economy) can’t boost the economy on their own. They’re still too burdened by debt, especially on homes that are worth less than their mortgages. Their jobs are disappearinig, their pay is dropping, their medical bills are soaring.

And businesses won’t hire without more sales.

So we’re in a vicious cycle.

Republicans continue to claim businesses aren’t hiring because they’re uncertain about regulatory costs. Or they can’t find the skilled workers they need.

Baloney. If these were the reasons businesses weren’t hiring – and demand were growing – you’d expect companies to make more use of their current employees. The length of the average workweek would be increasing.

But the length of the average workweek has been dropping. In August it declined for the third month in a row, to 34.2 hours. That’s back to where it was at the start of the year – barely longer than what it was at its shortest point two years ago (33.7 hours in June 2009).

It’s demand, stupid.

So what does a sane nation do when the consumers and businesses can’t boost the economy on their own?

Government becomes the purchaser of last resort. It hires directly (a new WPA and Civilian Conservation Corps, for example). It helps states and locales, so they don’t have to continue to slash payrolls and public services. (The help could be structured as a loan, to be repaid when unemployment drops to, say, 6 percent.)

And it hires indirectly — contracting with companies to rebuild our crumbling infrastructure, including school buildings, to take another example.

Not only does this create jobs but also puts money in the hands of all the people who get the jobs, so they can turn around and buy the goods and services they need – generating more jobs.

Get it? Not exactly rocket science.

So why don’t Republicans get it? Either they’re knaves – they want the economy to stay awful through next Election Day so Obama gets the boot. Or they’re fools – they’ve bought the lie that reducing the deficit now creates more jobs.

Every time you hear anyone say we’re “broke” or “can’t afford to spend more,” tell them we’ll be in worse shape if we don’t. If the economy remains dead in the water, the ratio of public debt to GDP balloons.

And remind them that the federal government can now borrow at fire-sale rates. Interest on the ten-year Treasury bill is 2 percent.

Robert ReichDo you hear me, Mr. President? Please — be bold next week. And if, as expected, Republicans refuse to go along, take it to the people. Mobilize the public. Use the bully pulpit. That’s what you have it for.

One more thing, Mr. President. You also have to tackle inequality. When so much income and wealth continues to flow to the very top, America’s vast middle class still won’t have enough purchasing power to boost the economy. Priming the pump is necessary but won’t be sufficient without enough water in the well.

Robert Reich
Robert Reich’s Blog

Related Posts Plugin for WordPress, Blogger...

Comments

  1. pigdog67 says

    Robert you identified two issues, jobs and lack of consumer spending due to inequality. However you left out the elephant in the room. Currency exchange rates. Stimulus money in America will just end up building businesses in China and accelerating offshoring of US jobs.
    Neither party ever gets this right. I believe it is intentional. Twiddle dee, twiddle dum as Pierre Elliot Trudeau said paraphrasing Hegels, the Hegelian dialect. Pretend there is a real dialogue in this ‘democracry’, but when both parties ignore the elephant then we all know we are being misled. If you really care about America, start a third party that will support the 65% of voters who are ‘independents’ and essentially pragmatists. I know if will tough sledding forcing China to raise their exchange rate versus the the USD but it will save our country.
    Make a choice if you want to be a historical figure or another party hack like all the other ‘leaders in America’

  2. says

    It seems to me that it’s time for the American government to start supporting successful small businesses (like Elaine’s) with business loans to help them grow, and expand. Also, it would be nice if many of those unemployed people had access to strategic business training for, not only identifying their passion, but how to develop their passion into a thriving small business!

    Small Businesses have been at the foundation of this country from the very beginning, and it seems that we have forgotten that with the Industrial Age and large corporations! At the beginning of the 20th Century, 95% of the American people were in business for themselves, and while I see Internet and Network Marketing growing relatively quickly, it would be nice if the American government became the impetus for strategic small business development and growth to help solve unemployment…possibly forever!

  3. Elaine says

    As usual you are always wrong. I do not think I can remember you ever being right about anything. I guess you are a full blown Marxist by now. Republicans continue to claim businesses aren’t hiring because they’re uncertain about regulatory costs. Or they can’t find the skilled workers they need. Well, that is why we are not hiring anymore is because of not knowing that we can meet all the requirement regulations or ever afford them. It is like one small wrong move for a small business owner & you can be forced to close your doors. Our business is great but I do not know how long we can go without hiring more people & I worry about raising our prices on all our rates because we do not want to scare people off or cause hardships on them. We do care about our employees, only 3, about our customers, but we have to treat everyone like we want them to treat us. Forcing them to things they are not comfortable with is not the way we like doing business.

    • Diane says

      Elaine, you should agree with him. If people had money in their pockets, you could raise your rates without scaring them off. The country isn’t broke, but the people are–the working people and the people who used to be working and the people who would like to be working.

      • Diane says

        PS to Elaine. I don’t know if your business is in LA, if it is, I’ll agree with you. The absurd regulations and bureaucracy that police LA small business is a disgrace. But federal regs are another story. I hope you’re not confusing one with the other.

Leave a Reply

Your email address will not be published. Required fields are marked *