Sunday, May 17, 2009

Re-Post Number 10: "Going Beyond Obama's Two-And-A-Half: A Case for More Jobs Now" (Dec 06, 2008)

Note: This post refers to the above YouTube Address, and is the last but one of this re-post series.
Today, President-Elect Barack Obama went on YouTube to discuss the issue of unemployment, and how to "put people back to work." His proposal was a for public works and government investment in infrastructure and alternative energy, creating two and a half million jobs. At first glance, this is a major transformation in American public policy, since it was the first time that a president has advocated that the government should directly create jobs on a mass scale since 1944, when President Franklin Delano Roosevelt proclaimed that "true individual freedom cannot exist without economic security and independence," and argued that "the right to a useful and remunerative job" should belong to all Americans. His vision was first proposed in law a year later as the Full Employment Bill of 1945, the high water mark of American liberal economic policy never again reached.

To that extent, Obama’s YouTube address constitutes a quiet revolution, a small yet telling sign that change comes to Washington in many way.

But it’s not enough.

(Disclaimer: I'm a PhD student in policy history, writing my dissertation on direct job creation policy, so I'm unreasonably obsessed about this topic.

Studying the job creation proposals that Obama’s campaign and his transition team has put forward (see here), we see a certain amount of caution and division as to how to achieve his goal of 2.5 million new jobs in two years: Obama has proposed $50 billion to the states to prevent cutbacks in spending and stimulate construction, a National Infrastructure Reinvestment Bank to invest $60 billion over 10 years; an Advanced Manufacturing Fund and a Manufacturing Extensive Partnership to push private-sector job creation; $150 billion over 10 years to create a Green Energy Economy; a Green Jobs Corps which appears to be a mix of jobs and jobs-training; and $1 billion over five years in transitional jobs. Some common themes emerge: first, a preference for indirect creation, either through the states or through private industry; second, an emphasis on long-term rather than short term; and third, a general tendency to small-bore approaches. The policy history literature on these approaches suggests that these are not the most effective way to create jobs.

Even if every item on this list passes into law, and creates the 2.5 million jobs that are hoped for, it would still only bring unemployment down from its projected peak of 8.5% to 7.25%, still far above normal levels and far away from FDR’s call for a job for all who wanted it. If we really do want to change national economic policy and get our country moving again, we need to think bigger and bolder.

Luckily, we have a model for how to create jobs immediately. In October 1933, in the depths of the Great Depression, Federal Relief Administrator Harry Hopkins pitched an audacious plan to President Roosevelt: create four million jobs directly by the Federal government, and then put people to work building necessary public goods, and do it all by Christmas. FDR signed off on the idea and the Civil Works Administration was born in November, with a month to go. Through Herculean efforts, Hopkins and his staff hit their goal and then some – by January, 4, 263,644 people reported for work. Though the CWA was a brief prelude to the later Works Progress Administration, its results were staggering. In six months, the workers of the CWA built nearly a half million miles of road; 7,000 bridges and 4,000 schools and 1,000 airports; the murals at Coit Tower in San Francisco and the Zoo at Central Park in New York stand as silent witnesses to their labor.

My advice to President-Elect Obama is that, yes he can do more. In the words of his Chief of Staff-designate Rahm Emanuel, the new administration will need to "throw deep and long" to deal with the crisis of unemployment. To accomplish this task, I recommend the following principles:

Think Big: the American economy and the American labor force is leviathan in scope, so a small-bore strategy, such as $1 billion for transitional jobs would have little macroeconomic impact and would serve only a small fraction of the unemployed. Four and a half million jobs, on the other hand, would immediately reduce unemployment from a hypothetical 8.5% to 6.25%, getting us half-way out of our current slump in one move (even before any Keynesian effect on the private sector). Not only would this have an enormous stimulatory effect on the economy, but it would also embrace almost a third of those in need of a job – a true down-payment on reform.

Focus on the People First, the Works Second: one of the reasons why public works programs are often less effective than their creators hope is that they focus on the works more than the public being helped – the money appropriated goes mostly towards land, equipment, materials, the jobs go to private contractors who are more likely to be employed already, and the impact of the program on unemployment is lessened. Focus first on putting four and a half million people to work, then focus on how you can use the sheer labor power of four and a half million people to accomplish your goals of renewing infrastructure and creating a new green energy economy. The results will flow – nine million hands working together can build as many schools as you like, install as many solar panels as you like, or throw up as many free wireless towers as you like.

Do It Now, Not Over Two Years: the longer we wait for these jobs to create, the harder a time you’re going to have getting the economy going again, even with a big stimulus package. But with four and a half million workers drawing paychecks (I would suggest paying $24,000 a year, so that these newly created jobs can fight not just unemployment, but poverty as well) every month, you would be able to create a steady stream of stimulus to the tune of $9 billion a month, flowing into the economy from the bottom up, exactly in the fashion most likely to cause the most re-spendings, and the greatest economic impact. Moreover, if FDR and Harry Hopkins could, at a time when carbon copy and the rotary phone were the heights in administrative technology, do all this in three months, you might be able to head off unemployment before it gets to 8.5%, and reducing unemployment from 6.5% to 4.25% would drastically cut short our current recession.

Why Does This Matter?

A reasonable person might ask, why quibble over the difference between two and four million? Isn't Obama already doing what you're asking him to do? Why does this matter?

Ultimately, it matters because of scale - the American economy is a leviathan, even if it's sick, and the scale of the jobs crisis is huge when we're losing a half-million jobs a month. In order to reverse the crisis, you need to send a signal to the system that's big enough to make every part of the economy sit up and take notice, that can actually move the macro-level of the economy in a significant way.

However, there's another issue - I want the U.S government, our political parties, and the American electorate to start thinking not just in terms of millions of jobs but in terms of percentage of current unemployment. The ultimate promise of public employment, the thread that runs from the CWA to the Full Employment Bill, is that the unemployment rate can be determined through collective democratic action, that we can establish full employment if we recognize the right of all citizens who want to work to a job. If we can restore that belief, that policy knowledge, then we can not just end this recession, but prevent the next one as it happens.

No comments:

Post a Comment