This short editorial was found on the Roosevelt Institute’s website and was written by Henry C.K. Liu. I’m reposting it here in toto—hopefully Henry won’t mind—because it’s a breathtakingly simple—and brilliant—way to help get the country out of this mess. Call it New Deal II, call it Socialism, call it whatever you want, this is a great idea, one worthy of a think tank bearing the Roosevelt name. At a certain point, they ARE going to have to do something like this—there are simply too many unemployed people to tell them all to go fuck themselves when their unemployment checks run out, don’t you reckon? If the Tea party types like Sharron Angle and Alaska’s Jo Miller get their way, WHAT do they expect will become of the people whose UI has ended and who face homelessness and destitution?
Obama and Congress have done plenty—too much if you ask me—to bail out big business, the banks and Wall Street. If Obama doesn’t get his thumb out of his ass and DO SOMETHING BOLD AND MEANINGFUL for the poor in this country, there are going to be riots and violence breaking out all over the place. But it doesn’t have to be that way, as this short essay points out:
The first year of the Obama presidency has been a monumental disappointment. By now, the President’s populist rhetoric of “change we can believe in” rings hollow against the hard data of the sad shape of the economy.
The critical bottleneck to recovery is the continuing loss of jobs. Conventional economic wisdom asserts that employment is the lagging indicator. Unemployment cannot be expected to fall until after the economy recovers. But in an economy that suffers from overcapacity due to low wages, as the world economy does today, economic recovery from excessive debt cannot be achieved without full employment with living wages to produce the needed rise in demand to absorb overcapacity. The government, despite its enormous power to intervene in the economy on the supply side, is stuck in a self-perpetuating vicious cycle of stagnation caused by unemployment that in turn causes stagnation.
Yet all is not lost. The President needs only to reestablish his political leadership with bold and effective action to deliver help directly to deserving workers rather than to failed undeserving financial firms that are allegedly too big to fail. One way to do this is for President Obama to use the coming State of the Union address at the beginning of the second year of his presidency to announce that he will be the first president in US history to abolish unemployment in the US economy. He will be the president who will smash the destructive myth that structural unemployment is needed to hold down inflation even in a deflationary cycle.
This is not an impossible task. The US now has 6.5 million unemployed workers, 4 million of whom joined the unemployment rank during the first year of the Obama presidency. The President can introduce a Full Employment Program starting February 1, 2010 to give a job to every American who wants one, to be funded by a Full Employment Fund constructed out off already-appropriated but yet unspent bailout and stimulus money. These jobs can be socially constructive jobs such as teachers, nurses, caretakers of children and seniors, police, artists, health workers, writers, inventors, etc., with the prime function of increasing demand in the economy.
At the rate of the 2008 national average wage of $42,000, a program to fund 6.5 million jobs will cost $2.7 trillion a year. In the past two years, the government has committed over $20 trillion in various form of bailout and stimulus packages, with very little to show for it in the form of economic recovery. The not-yet-spent portion of this $20 trillion can fund full employment for more than three years at a declining rate. As this money is injected into the economy in the form of living wages, the resultant rise in demand will increase the utilization of the capital assets to reduce overcapacity. A balance between supply and demand will be maintained by full employment to permit the economy to grow again.
The resultant growth in the economy will reduce the spending rate of the Full Employment Program way before the allotted money is depleted. With full employment, the US economy of $14 trillion GDP can grow at a 6% annual rate, producing an additional GDP of $560 billion the first year. The $2.7 trillion Full Employment Fund will be repaid in less than 4 years.
That is a change we can believe in.
Roosevelt Institute Braintruster Henry C.K. Liu is an independent commentator on culture, economics and politics.
Posted by Richard Metzger |