There is a depressing complicity among much of the political leadership about the recession. Many politicians seem prepared to accept that we will have sky-high rates of unemployment for the indefinite future. Projections from the Congressional Budget Office and other authoritative forecasts show the situation improving little over the next few years.
At the moment, this means 15 million people unemployed, nine million underemployed and millions of other workers who don’t even get counted because they have given up hope of finding a job and stopped looking. It is outrageous that we have this situation today. Allowing high unemployment to continue for years into the future is unacceptable.
We know how to get the unemployment rate down.
Part of the story should include programs like the Local Jobs for America Act that will save and create jobs in areas of high unemployment. This will be a way to give young people a decent start to their working careers in areas like Detroit where the youth unemployment rate is close to 50 percent. These workers can help maintain and cleanup parks, schools and other public facilities.
We should also build on the successful parts of President Obama’s American Recovery and Reinvestment Act (ARRA) of 2009, by increasing their size. The ARRA includes tax credits that will provide incentive to weatherize hundreds of thousands of homes. The target should be weatherizing millions of homes. This puts people to work in the short run and reduces energy use in the long run.
We also need to do much more to improve the country’s infrastructure. For example, modernizing the electric grid would both make the grid more efficient and also reduce the number of people who lose power every time we have a storm. We also need to modernize our transportation system, most obviously by increasing the use of mass transit and building the type of high-speed trains that have been operating in Europe and Japan for 40 years. The $50 billion the president has recently proposed for infrastructure spending is a good first step, but more can be done.
This is an affordable agenda. In the short term, the deficits are clearly not a problem. Investors from around the world are lending their money to the United States at extremely low interest rates. In other words, the people with big money on the line are not worried that the US government is going bankrupt.
This is for good reason. In the short term, spending from the government is making up for the lack of spending from the private sector. The reason that so many people are unemployed is that spending by the private sector plummeted after the collapse of the housing bubble. Construction spending has been cut by more than half. Consumption spending is also a way down, as homeowners who lost trillions of dollars of housing equity realize that they must now save more. Spending to create jobs will simply be filling the hole left by these cutbacks, making the economy stronger, not weaker. Leaving people who want to work without jobs is simply a waste from an economic standpoint.
Over the longer term, we will likely need more revenue. The best place to look for money is the root of the crisis: Wall Street. A modest tax on Wall Street financial speculation can raise an enormous amount of money, by some calculations more than $150 billion a year or more than $1.5 trillion over the next decade.
This tax would have very little impact on the sort of investing that middle-class people do to save for college or retirement, but it would impose a substantial cost on fast-paced financial speculation. The money raised would go a long way toward funding a serious jobs agenda.
With the unemployment rate more than double its pre-recession level, jobs should be at the top of the national political agenda. Tens of millions of people are suffering each month that the downturn persists and the pain gets worse over time. What makes the situation more infuriating is that this crisis was entirely preventable if the people running economic policy had done their job. In the same way, we can get the unemployment rate down to more reasonable levels if Congress would just do its job.