Bob Pollin: There is no engine driving job creation so no real recovery is possible.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay, coming to you from Baltimore.
The U.S. Labor Department released statistics on the employment picture in the United States, and it doesn’t look much better, in fact perhaps even a little worse. Here’s what they said, as reported by Kevin Hall of McClatchy Newspapers.
Employers added a far weaker than expected 69,000 jobs in May, the Labor Department said Friday, a dismal report that marked the third straight month of disappointing employment numbers. Mainstream forecasters had expected non-farm payrolls to grow by about 150,000, but instead of that number, came in almost half of that. In a further sign of the economy shifting back into lower gear, the Bureau of Labor Statistics revised down April’s 120,000 new jobs by 38,000, making May the second consecutive month with job growth below 100,000 needed to keep pace with new workers entering the labor force.
Now joining us to talk about the significance of these numbers is Bob Pollin. He’s the cofounder and codirector of the PERI institute in Amherst, Massachusetts, and an often-contributor to The Real News Network. Thanks for joining us, Bob.
ROBERT POLLIN, CODIRECTOR, POLITICAL ECONOMY RESEARCH INSTITUTE: Very happy to be on. Thank you, Paul.
JAY: So what do you make of these numbers? We had been told about a slow recovery, but now, actually, two months in a row, actual, essentially, job losses. What do you make of it?
POLLIN: Well, it’s abundantly clear that we do not have any recovery going on, we don’t have any engine of job growth.
We have two major drags on the economy. One is the situation in Europe, which is completely unresolved after having been through yet another round of solutions that don’t solve anything. And then, secondly, we have austerity conditions in the United States, where we have, especially at the state and local government levels, budget deficits that are getting resolved through cuts. I mean, we know Jerry Brown just announced two weeks ago that the budget deficit for California is in the range of $15 billion, and that most of that is going to have to be covered—according to Brown, probably the most liberal sitting governor in the country, most of it is going to have to be covered by cuts.
Now, the state and local governments in combination are the biggest single employer in the United States economy. So if you combine the dismal situation in Europe with the austerity conditions in the United States, we don’t have an engine of job recovery. So nobody should be surprised when the employment picture continues to look bleak.
JAY: Yeah. And these recent job numbers of job losses, 13,000 of those jobs lost were government jobs at one level or the other. We ran a little clip in an interview we did earlier in the week with John Weeks. It was Fareed Zakaria interviewing the Italian prime minister, Mario Monti. And he was saying—and it’s interesting coming from him, because he’s a technocrat (they like to call them technocrats) more or less appointed by European banking elite. He was actually complaining. In Italy, he said, we’ve done everything they asked. We’ve done the fiscal discipline, we’ve done the austerity. And all we seem to have accomplished is to destroy domestic demand. There’s no growth coming out of this. I mean, it seems rather obvious that’s what you would get, but there’s next to no discussion about that here in the United States.
POLLIN: This is obvious stuff. This is economics 101. If you cut spending, you cut job creation, because people have to get paid to spend money and to stimulate the economy. So we have to reverse the logic of austerity that is consuming the entire Western Hemisphere, Europe as well as the United States. There is no alternative to that if we are serious about any kind of recovery. Recoveries do not come out of imposing austerity conditions. It was obvious before this recession, and the experience that we’ve had for the last two years have contradicted all arguments on behalf of austerity. It doesn’t work. It never has worked. There’s no logic behind why it should work. So that’s what we’re experiencing.
And by the way, the job numbers, the 69,000 jobs, are, you know, roughly half of what is necessary just to maintain the unemployment rate at level. And that’s not even getting us, even, any improvement. Therefore, as long as we continue along this path, we can expect there will be no significant improvement, if any, on job creation.
JAY: Now, the Republicans certainly don’t want to see any more stimulus, and it’s to their political advantage if the unemployment numbers go up. I don’t know, in the final analysis, if President Obama’s heart was in that much more stimulus, but I guess it’s in his interest to do some. But he’s not going to get anything passed through Congress. What levers does he have between now and the election if he wants to pull a few of them?
POLLIN: Well, in terms of government spending, the levers are basically being blocked because nothing can get through Congress. Even if—as you said, if he wanted to do it, nothing can get through Congress.
The types of things that he could do on his own are not going to be significant enough on their own. We’ve talked about a few things that they could do. That would be expanding the loan guarantees for small businesses via the Small Business Administration. That could help unlock the credit market that has been frozen. Small businesses have been frozen out of the credit market since the recession. That’s one thing.
The other thing that has to be done, as we have talked about before, can be done through the Federal Reserve. The Federal Reserve has to take every action it can to unlock the $1.6 trillion that banks are sitting on. While we’re having an economic crisis, the banks get to borrow at zero percent, and then they sit on it, $1.6 trillion, 10 percent of GDP—10 percent of GDP. The Federal Reserve on its own could start charging an excess reserve tax to banks, forcing the banks to start looking for loans to make to businesses to create jobs. That can be done completely outside of what Congress thinks.
JAY: Is there any suggestion that they’re even considering that?
POLLIN: Well, it comes up. It’s not happening. It’s the kind of thing that, again, at this point is obvious. I mean, what’s the point of the Federal Reserve running a zero interest rate policy now for three years? This is historically unprecedented, a hyperaggressive expansionary monetary policy that is accomplishing almost nothing in terms of job creation, only because the banks refuse to do anything.
Now, yes, we can say, well, okay, we should nationalize the banks. Well, since we can’t even get a stimulus program through Congress, we’re not about to see the banks getting nationalized.
But the Fed on its own—on its own, the 12 members of the board of governors could vote to impose an excess reserve tax. And it has been discussed in mainstream circles. Even some Republicans, Republican economists, have discussed some variation on this as a way to make monetary policy, the only real macro tool available now, make it relevant, make it do something, make it accomplish something in terms of job creation.
JAY: But the problem here is, from the administration level, President Obama, while he’s out trying to raise money on Wall Street, would have to take on the banks. And the Fed, you know, has so many members of Wall Street on its boards, it’s unlikely to do it if the banks don’t want it. So it’s kind of paralyzed, I suppose.
POLLIN: Yes, the banks, of course, don’t want it. But the banks also are getting this incredible deal right now, which is they can borrow at zero, near zero. Again, this is—for three years and standing now, almost, this has been the deal they’ve had. And in order for them to justify—to have that justified at the Fed, at the very least we have to show some movement in terms of the money going out to job creation. That is not happening. And so that’s the kind of areas where there can be a major pressure point.
Again, remember that not a penny of that comes out of the taxpayer dollar. Right? This is all money created by the Fed, so this is not costing the taxpayers anything. It is benefiting business. It is benefiting small business. It is benefiting communities by job creation. And that can at least help to provide some momentum for a recovery that’s sustainable.
JAY: Thanks for joining us, Bob.
POLLIN: Thank you.
JAY: And thank you for joining us on The Real News Network.