Re-Post Number 11: "Stimulus Is Not Enough: Job Creation Now!" (Jan 09, 2009)

Note: and that's the last of the re-posts. The context for this post was the political fight over the Obama stimulus package.
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In the last few months, the U.S economy has seen one of the fastest slides into one of the most terrifying employment declines in American history - we are now losing jobs at the rate of 500,000 a month.

Given this reality, the current stimulus proposal is no longer sufficient. We must move beyond a debate that tries to balance a couple hundred billion in tax cuts with four hundred billion in public works, aid to the states, and traditional stabilizers (UI, food stamps, etc).

In the last few months, the U.S economy has seen one of the fastest slides into one of the most terrifying employment declines in American history - we are now losing jobs at the rate of 500,000 a month. Given this reality, the current stimulus proposal is no longer sufficient. We must move beyond a debate that tries to balance a couple hundred billion in tax cuts with four hundred billion in public works, aid to the states, and traditional stabilizers (UI, food stamps, etc).

What we need are jobs, and jobs now.


Background:

For about two years now, I've been diarying about public employment programs, which I'm studying for a dissertation in U.S Public Policy History. If you're interested in reading more on job creation programs, you can check out any of these diaries:

[edit: see here]

The Current Crisis:

Given the stunning rate of job loss, I believe that traditional stimulus measures will not be adequate to offset the damage being done to the economy. On the jobs front, if we create three million jobs as President-Elect Obama hopes, we may well have only bought ourselves six months of breathing room rather than a lasting improvement. On the consumption side, even if we shovel $1 trillion into the economy, if people are seeing jobs disappear at the rate that they have, their propensity to consume will decrease and their propensity to save will increase as people batten down the hatches against the bad times and save money for when the jobs go. Not to say that it won't have any effect, but it's going to be much much weaker than one would hope.

Given the seriousness of this situation, I think we need to radically re-think the stimulus package. To begin with, the tax cuts need to come out - they're not going to have nearly enough of an effect on people's spending habits if people's psychological posture is determined by an omnipresent fear of layoffs and unemployment. Next, we need to understand that the current commitment to public works is inadequate to the task. While many of the existing public works plans - from greening buildings to building high-speed rail - are quite worthy, the nature of the process of letting out contracts, vetting proposals, and getting the site operational takes too damn long, and will not generate enough jobs fast enough.

What We Need:

As I have argued before (see here), public works are not the policy tool we should be looking to, at least not in the traditional contractor model.

Instead, I believe that the Federal government needs to hire unemployed workers directly and immediately. We should begin by hiring 5.5 million workers right now, to bring the unemployment rate down from 7.2% to 3.6%, and to increase that number at any time to keep the overall unemployment rate at 4% or below if/when additional private sector jobs are lost.

Why? First, we need to dramatically reverse our current downtrend. Creating these jobs would send a dramatic signal to every consumer and producer that mass unemployment is not going to happen, that it is not necessary to cut back in the face of crisis. Second, we need a policy big enough for our economy. Given the sheer scale of the American labor market, in order to send a signal that really resonates, you need to do something at a large enough level that it actually changes the economic reality - cutting unemployment in half is exactly the right kind of signal. Third, every month we wait to create jobs is less income going into the economy and more people falling into poverty - in order to start spending fast enough to get ahead of the deflationary effects of this recession, we need to create jobs faster.

Precedent:

Luckily, we do have precedent for how to do this, in the Civil Works Administration. In the fall of 1933, with unemployment still hovering in the 20% range, Harry Hopkins (the head of FDR's Federal Emergency Relief Administration) went to President Roosevelt with a plan to create 4 million jobs to reduce unemployment and keep people alive during the normal seasonal downturn in unemployment in the winter. To his surprise, Roosevelt agreed, and the CWA was born in October 1933, with a grant of $400 million dollars "borrowed" from FDR's public works program.

In three months, the CWA had created 4.26 million jobs. At a time when the most advanced administrative technology was the carbon copy and the rotary phone, all 4.26 million workers were hired and put to work that quickly. Surely, today we can do better.

The Cost:

Assuming a base salary of $24k/year and a non-salary overhead of 30% (a rather generous assumption, given that New Deal era programs managed to limit non-salary costs to 20%), it should cost roughly $31 billion to put one million people to work for a year. Five and a half million people makes $170.5 billion dollars - well within the current framework of President Elect Obama's $750 billion plus package.

In the end, this is not a question of whether we can find $170 billion to spend; the sheer size of the bailouts and the proposed stimulus package shows that the American government's fiscal powers are much greater than we've been led to believe on social welfare issues. It's more a question of how we spend money, and the ideology contained therein.

Republicans want to give tax breaks because they don't believe in government, and they want to benefit the rich who they believe are best suited to spend the money. Congressional Democrats want to spend the money traditionally, because they're used to spending on traditional areas and constituents (not that their proposed spendings are a bad idea, far from it), and because it's been 70 years since we've done anything like this. Creating millions of jobs directly is a radical departure from standard practice, and Democrats may well be nervous about doing something so drastic.

However, we simply cannot afford to wait.

Please read this, promote this if you can, pass the word on. There is a way out of this crisis, but we just have to remember how we did it last time.

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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.
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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.

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Re-Post Number 8: "Jobs How? An Introduction to Obama's Jobs Policy" (Oct 15, 2008)

Note: This is one of the last re-posts, dealing now with the nature of jobs policy in the new Obama administration.

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A little bit of background: this essay stems from several years of research on job-creation policy colliding with the 2008 election. As you may have noticed, Obama's anti-poverty platform and his economic recovery plan both have a focus on jobs; it's a major part of the Democratic stump speech (not just in Obama's speeches, but also in the speeches of his surrogates); it's a winning issue at a time when unemployment hovers at 6.1% and may rise as high as 8% in the coming recession.

This essay is a pitch, both to the Obama campaign, to progressives, and to Congressional Democrats that the time is ripe for a new direction for jobs policy, from an approach that emphasizes job training and private sector job creation, to an approach that emphasizes on-the-job training and public sector job creation in light construction, "public works," and social services.

Background:

The current Obama platform includes the following jobs-related policies:

• Provide $50 billion to Jumpstart the Economy and Prevent 1 Million Americans from Losing Their Jobs: This relief would include a $25 billion State Growth Fund to prevent state and local cuts in health, education, housing, and heating assistance or counterproductive increases in property taxes, tolls or fees. The Obama-Biden relief plan will also include $25 billion in a Jobs and Growth Fund to prevent cutbacks in road and bridge maintenance and fund school re­pair - all to save more than 1 million jobs in danger of being cut.
• Reward Companies that Support American Workers: Barack Obama introduced the Patriot Employer Act of 2007 with Senators Richard Durbin (D-IL) and Sherrod Brown (D-OH) to reward companies that create good jobs with good benefits for American workers. The legislation would provide a tax credit to companies that maintain or increase the number of full-time workers in America relative to those outside the US; maintain their corporate headquarters in America if it has ever been in America; pay decent wages; prepare workers for retirement; provide health insurance; and support employees who serve in the military.
• Create a National Infrastructure Reinvestment Bank: Barack Obama and Joe Biden will address the infrastructure challenge by creating a National Infrastructure Reinvestment Bank to expand and enhance, not supplant, existing federal transportation investments. This independent entity will be directed to invest in our nation’s most challenging transportation infrastructure needs. The Bank will receive an infusion of federal money, $60 billion over 10 years, to provide financing to transportation infrastructure projects across the nation. These projects will create up to two million new direct and indirect jobs and stimulate approximately $35 billion per year in new economic activity.
• Invest in our Next Generation Innovators and Job Creators: Obama and Biden will create an Advanced Manufacturing Fund to identify and invest in the most compelling advanced manufacturing strategies. The Fund will have a peer-review selection and award process based on the Michigan 21st Century Jobs Fund, a state-level initiative that has awarded over $125 million to Michigan businesses with the most innovative proposals to create new products and new jobs in the state.
• Double Funding for the Manufacturing Extension Partnership: The Manufacturing Extension Partnership (MEP) works with manufacturers across the country to improve efficiency, implement new technology and strengthen company growth. This highly-successful program has engaged in more than 350,000 projects across the country and in 2006 alone, helped create and protect over 50,000 jobs. But despite this success, funding for MEP has been slashed by the Bush administration. Barack Obama and Joe Biden will double funding for the MEP so its training centers can continue to bolster the competitiveness of U.S. manufacturers.
• Invest In A Clean Energy Economy And Create 5 Million New Green Jobs: Obama and Biden will invest $150 billion over 10 years to advance the next generation of biofuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial scale renewable energy, invest in low emissions coal plants, and begin transition to a new digital electricity grid. The plan will also invest in America's highly-skilled manufacturing workforce and manufacturing centers to ensure that American workers have the skills and tools they need to pioneer the first wave of green technologies that will be in high demand throughout the world.
• Help Americans Grab a Hold of and Climb the Job Ladder: Obama and Biden will invest $1 billion over five years in transitional jobs and career pathway programs that implement proven methods of helping low-income Americans succeed in the workforce.
• Create a Green Jobs Corps: Obama and Biden will create a program to directly engage disadvantaged youth in energy efficiency opportunities to strengthen their communities, while also providing them with practical skills in this important high-growth career field.

His Monday speech, "Rescue Plan for the Middle Class" also included several jobs-related policies:

• A New American Jobs Tax Credit: Obama will provide a new temporary tax credit to companies that add jobs here in the United States. During 2009 and 2010, existing businesses will receive a $3,000 refundable tax credit for each additional full-time employee hired. For example, if a company that currently has 10 U.S. employees increases its domestic full time employment to 20 employees, this company would get a $30,000 tax credit—enough to offset the entire added payroll tax costs to the company for the first $50,000 of income for the new employees. The tax credit will benefit all companies creating net new jobs, even those struggling to make a profit.
• Save one million jobs through immediate investments to rebuild America’s roads and bridges and repair our schools: The Obama emergency plan would make $25 billion immediately available in a Jobs and Growth Fund to help ensure that in-progress and fast-tracked infrastructure projects are not sidelined, and to ensure that schools can meet their energy costs and undertake key repairs starting this fall. This increased investment is necessary to stem growing budget pressures on infrastructure projects. In addition, in an environment where we may face elevated unemployment levels well into 2009, making an aggressive investment in urgent, high-priority infrastructure will serve as a triple win: generating capital deployment and job creation to boost our economy in the near-term, enhancing U.S. competitiveness in the longer term, and improving the environment by adopting energy efficient school and infrastructure repairs. In total, Obama’s $25 billion investment will result in 1 million jobs created or saved, while helping to turn our economy around.

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Now, all of these proposals are great in and of themselves, and they represent a huge leap from 2000 and 2004 in terms of a Democratic commitment to providing and creating jobs - moreover, in comparison to New Democrat priorities in the Clinton years, they really show the revolution in Democratic economic policy since the advent of the Bush years. In that regard, I have nothing but praise for Obama.

However, one thing that's clear is that there is a real tension between different strategies: the State Growth Fund, Jobs and Growth Fund, National Infrastructure Reinvestment Bank, and similar projects constitute a "public works" approach - creating jobs through public investments, primarily in infrastructure. This is a tried and true strategy of the Democratic Party in dealing with economic downturns. The Patriot Employer Act, New American Jobs Tax Credit, Manufacturing Extension Partnership, and Advanced Manufacturing Fund represent a similar, more private-sector approach that could be called a "labor demand" source - creating private jobs with public incentives. This is also a long-running approach to job creation, dating back to the Area Redevelopment Acts of the 1950s and 1960s. Finally, the "career pathway programs" and "Green Jobs Corps" represent more of a job-training approach - you'll note that the actual transitional jobs in question are rather hard to pin down in terms of numbers, but $1 billion over five years is not an encouraging signs. In any case, it's quite different from John Edwards' proposal for one million public jobs in the primaries.

Now each of these strategies have advantages and disadvantages. I'm very much a biased partisan on this question; from my research, I think that direct job creation is best, followed by public works, followed by labor demand, and job training is the worst form of jobs policy. For more on direct job creation, I highly suggest Helen Ginsburg's Full Employment and Public Policy or Phillip Harvey's Securing the Right to Employment. For more on public works, I'd suggest Robert Leighninger's Long-Term Public Investment or Jason Scott Smith's Building New Deal Liberalism. For more on "labor demand" policy, I'd recommend Timothy Barthik's weighty study Jobs For the Poor. For more on jobs training policy, I'd recommend Gordon Lafer's The Job Training Charade.

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So why does all of this technical stuff matter?

Firstly, size, scope, and scale matter. The American economy, labor market, and working class are huge institutions and groups, and if you want to have a real impact on the jobs picture, you need to do something big. The Works Progress Administration worked because it provided jobs to a third of the unemployed; CETA didn't work because it provided jobs to only 725,000 people at a time when there were more than six million people unemployed (or 12% of the unemployed). Hence, spreading yourself across nearly a dozen programs could well mean that you create quite a few jobs here and there, but not the same kind of numbers you could create by maximizing your spending in the most effective area. It also means that the ultimate size of the program matters - a billion here or there over five years won't cut it, but if you were to take the $700 billion bailout and create $20k/year jobs with it, you'd employ every unemployed person twice over. Roughly speaking, it costs $30 billion/year to create 1 million jobs at $20k/year, which reduces the unemployment rate by half a percentage point.

Secondly, policy design has political consequences. Public jobs tend to produce public acceptance of and advocacy for the idea that the government can and should provide jobs for the jobless, and that the government can and should intervene in the economy to promote social ends. It's for that reason why jobs were at the center of the New Deal, and why one of Reagan's first social spending cuts were the 725,000 jobs of CETA. Thus, a choice between tax cuts and public works says a lot about our beliefs about what causes unemployment and what creates employment, the proper relationship between the public and private sectors, and the proper relationship between the people and their government. Hence, a more progressive policy will, over time, produce a more progressive public - political scientists of the American Political Development school refer to this as policy feedback (although I'd urge taking a pinch or two of salt with this idea).

Thirdly, not all policies are equal. For reasons that I will discuss in my next diary, job-training programs don't work very well; tax cuts are somewhat better but still uneven; public works are better still, but are less efficient in terms of creating lots of jobs quickly; direct job creation or "public employment" is best; the Civil Works Administration famously created 4.2 million jobs in just three months. Because of the political stakes, the consequences of programs will matter: if we invest in jobs policy, and it works, you shift the boundaries of acceptable economic policy in a big way, with the New Deal and its coalitions as a key example. If you do it, and it doesn't work, you establish a conservative conventional wisdom that's very hard to work against - witness the long-term influence of the Reagan Revolution over the last thirty years.

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Re-Post Number 6: "Public Employment and Economic Planning: History, Theory, Implications" (September 19, 2007)

Note:
You'll note some similarities between this diary and the more recent diary on economic planning and the Apollo Alliance. Luckily, the older diary goes into what future economic planning should look like, providing enough new material to be of interest.
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History

Economic planning is probably the most obfuscated public policy in American history, bar none. The cries of socialized medicine, the Harry and Louise ads, the current struggles over SCHIP - all of these pale in comparison to the sound and fury raised over economic planning. Conservative Republicans and Democrats called it creeping socialism, Hayek called it creeping fascism, and the public imagination reeled before an onslaught of images of totalitarian control.

The reality was much less terrifying. The NRPB, the National Resources Planning Board, was probably the most influential of the New Deal planning institutions. Ostensibly an institution for rationalizing use of things like coal, oil, timber, etc., the NRPB instead became a place for people to re-think economic planning as an exercise in democracy, as a way of directing the guiding the economy towards goals that enhanced the quality of life for all citizens, as a way of putting the people in charge of their economic life.

Throughout the 1940's, the NRPB published a series of reports, laying out the blueprint for a new kind of American society that would come after the war, a society based on the principles of the Four Freedoms and the Second Bill of Rights proposed by President Roosevelt.

Now how does all of this tie in with public employment? In their reports, the staffers of the NRPB looked to programs like the Works Progress Administration as an example of how the government could provide services en masse to Americans in need. More importantly, the NRPB's reports, especially the 1942 Report titled "Security, Work, and Relief Policies," envisioned the provision of jobs by the Federal government as a permanent policy designed to push the country towards full employment, in conjunction with Keynesian economic policies.

The importance of this shift in economic planning, from the crude efforts to secure price and wage cooperation under the National Recovery Administration to a more sophisticated understanding of the possibilities of public action, was that it expanded the policy imagination of New Deal Democrats far beyond the narrow scope we see today. Moreover, New Deal Democrats had reason to believe that such actions were possible. The WPA had shown that the Federal government could fund and administer mass employment projects and that such projects had a substantial impact on the unemployment rare. The Office of Price Administration, a war-time agency that was given the power to regulate prices and wages, succeeded in holding inflation below 1% in a period of full employment.

Because of these advances, the NRPB believed that the national government could provide the trifecta of broad prosperity: low unemployment, low inflation, high economic growth. In essence, everything that the so-called "golden age" of the 1950-1960's was supposed to have achieved. However, there were two key differences between the golden age as envisioned by the economic planners and the golden age that transpired: first, public employment, price and wage controls, and more expansive social insurance programs would have ensured that prosperity would have flowed from public actions, such that the political will of the people, not the largess of corporate America, would have promoted economic growth. Second, it would have meant that the benefits of post-war growth would have been much more broadly distributed, both to the poor, and to minorities.

The end result, however, was that of political defeat - the de-funding of the NRPB, the watering-down of the Full Employment Act (as discussed in my previous diary), and the demonizing of both public employment and economic planning.

Theory

So what should this tell us about economic planning and public employment?

First, it should remind us that the belief that the government's actions do not influence the economy is historically inaccurate - public action can and has dramatically shaped the economy, altering employment levels and inflation rates for periods of several years at a time. Thus, our understanding of what is and is not possible in terms of economic policy should be expanded beyond the boundaries of the orthodox.

Second, it should make us think about the purposes behind economic policy. It is often a habit of Democrats to focus on particular economic indicators - economic growth, numbers of jobs created, and so forth - instead of picturing a vision of the kind of economy and society that we seek to achieve and then moving towards it.

Third, we must realize that victory begets victories and defeat, defeats - we cannot allow any push we make in the future to be stymied by Republican obstructionism. Just as the defeat of health care in 1994 robbed the Democrats of a major policy victory that would rally the base AND working class voters, so too will defeats on public employment, or any other initiative. More on this topic in my next diary.

In terms of economic planning, we need to shift our theoretical perspective to the global and the long-term. The United States stands at an uncertain point - we are still the world's largest economy, but long term trends in terms of debts, deficits, and balance of trade shows how vulnerable our position is. The American people stand at an even more perilous position - the poor, the working class, and the middle class are all facing stagnating and/or declining fortunes in terms of income, wealth, homeownership, health coverage, and no doubt higher education will be soon to follow.

What then should economic planning aim at?

1. Restore Income to Restore Savings/Balance of Trade/Rough Equality

The American economy has been shored up in recent years by the endless cycle of consumer debt that masks the decline in real incomes. Boosting the purchasing power of the ordinary American would help to restore our internal market- an essential goal, given the variability of the globalized economy. Moreover, it would put our consumer base on a much stronger basis regarding income v. debt, allowing savings, assets accumulation, and investment to increase, and redirecting more income towards the broader economy and away from finance payments, which fuel an over-saturated financial sector.

2. Use Public Employment to Shield Against Globalization

If the reality of living in a globalized economy is that industries shift rapidly across borders, then it becomes essential for the U.S and other developed economies that are likely to lose industries to less developed region to increase, not decrease their social spending. Increasing public employment can keep unemployment rates low, preventing economic decay in areas that are losing jobs, maintaining consumption levels through fueling wages. Moreover, public employment provides a shield against the destabilizing effects of globalization, a safe haven against sudden ups and downs in world markets, by counter-cyclical actions.

3. Use Public Investment to Guide the Economy Forward

Public investment can act in a complementary fashion, to create new industries that take the place of old industries, to improve the national infrastructure upon which industries depend - not just roads, bridges, and levees, but also schools, wireless internet, and research and development into new technologies. This both creates new goods and services, adding to economic growth, but also provides jobs that are designed to be more "grounded" in the American economy than consumer-goods production.

4. Set A Comprehensive Target for Economic Policy

Although we don't admit it, and we don't approach it in as much of a conscious fashion as we need to, there are certain targets that government policy does aim at - inflation at less than 2% a year, economic growth of at least 3% a year have been fairly standard aims. However, they are not targets that particularly benefit ordinary Americans - they don't include wage growth, they don't include unemployment, and they don't include the distribution of wealth in American society.

So when we engage in economic planning, it should be to hit targets that represent the whole of the American economy and the whole of the American people as well.

Implications

I'm sure that many of you are familiar with the Apollo Initiative, a joint project of labor unions and environmental groups to achieve energy independence on a basis of green technology and green jobs.
http://www.apolloalliance.org/...

Now, on it's own, the Apollo Initiative is an impressive policy innovation, envisioning a 10-year, $300 billion push towards alternative energy that envisions a whole host of coordinated policies, subsidies, and tax reforms towards a single end. It's certainly much more innovative than anything we've seen in the last few years.

However, as a model for future policy, it suggests an intriguing possibility for American policy and economic planning. Here we have a model of coordinating economic and social objectives that aims to "do good and do well" at the same time, a way of economic planning without falling into the public relations traps.

Imagine, if you will, a host of Initiatives, all designed to boost economic performance, develop new industries, create jobs, improve the national infrastructure, and benefit the commonweal of the country:

• Athena Initiative - centered around education (building new schools, recruiting teachers by providing salary bonuses, developing new educational technologies, expanding access to higher education through expanding campuses of both public and private universities - think about it, Harvard rejects all but 7% of applicants, turning away thousands and thousands of superlative students - why not expand the undergraduate body beyond just 6-odd thousand?)
  
• Mercury Initiative - centered around telecommunications and information technology (providing free broadband internet, universally compatible cellular phone networks, expanding opportunities for startups in the music and movie business, and so forth).
• Asclepius Initiative - centered around health care industry (leveraging our current public investments in medicine such as the VA, NIH, etc. into creative new publically-owned generic drugs, providing incentives for healthier work environments, improving our public health systems, using health research to uncover "best methods" of health care, so that more money is put towards care instead of overcare, and so forth).

In this way, the federal government would essentially become the national venture capitalist, using its ability to sustain investments across decades before technologies prove themselves.

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Re-Post Number 5: " WPA and Keynesianism - Theory and Policy of Public Employment" (August 13, 2007)

Note:

The following post continues in the trend of moving from the technical aspects of public employment policy to the intellectual aspects of public employment policy. Here, I show how public employment policy both fits and doesn't quite fit within the boundaries of Keynesian economic theory.

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In my last diary, I wrote about the differences between public employment and public works, and the implications for current and future policy. Today, I’m going to talk about the relationship between Keynesian economic policy and public employment, and what lessons we can draw from this.

First, a quick definition of terms:

Public Employment – as has already been talked about, public employment is the policy of the government directly hiring people who currently are unemployed for the purposes of reducing unemployment, increasing purchasing power, and secondarily creating public goods and services.

Keynesianism - is a bit more complicated, and as a non-economist, I’m not really that qualified to talk about it (I have read the General Theory and several books about the historical impact of Keynesian theory on public policy, but I haven’t taken any courses on Keynesian economics). But to present just a simplified version of John Maynard Keynes’ theory, and the public policy that resulted from it:



* First, Keynes argued that classical economists had misunderstood key aspects of wages and prices. As he argued, the idea behind Say’s Law – that supply creates its own demand, and that therefore the economy is always at an optimum equilibrium – was not right. The level of production and employment in an economy at any given time was not determined solely by the individual calculations of capitalists regarding their own prices and wages, but was profoundly shaped by aggregate or effective demand. Essentially, Keynes was arguing that you can’t sell stuff without there being enough people with money to buy it.

* Second, Keynes argued that, contrary to the advice of orthodox economists at the time, slashing wages (both to cut costs and to increase willingness to work) was not the answer to the Great Depression. Rather, he argued that cutting wages also cut effective demand for goods (how much people are actually able to buy, versus how much they’d like to buy) – which cut profits, returns on investment, and any expansion of the economy those things would create. Essentially, Keynes was arguing that protecting profits at the expense of workers would make things worse.

* Third, Keynes argued that people are not as economically rational as classical economists would like to believe – that people have psychological reactions to the economy. To begin with, he argued that when wages and prices fall, people hold back from spending their money because they expect them to keep falling. Next, he argued that people have a preference to save more money than they need to – and that in a recession or a depression, people hold onto their money because they’re afraid that if they invest it, they’ll lose it. This leads to insufficient demand and insufficient investment that prevents recovery. Essentially, Keynes was arguing that economies could "stabilize" at levels far below their normal levels of "full" employment and investment – meaning that economies wouldn’t just get better on their own.

* Fourth, Keynes argued that the government was uniquely able to repair this situation, if it acted in an organized fashion. First, by using its power to tax and borrow, the government could bring the money that had flowed out of the economy (when people sold off stocks and bonds and emptied out their bank accounts( back into the economy. Second, by spending even at a deficit, the government could increase demand, investment and profits, "pump-priming" the economic recovery. As long as the government acted in a counter-cyclical fashion – borrowing and spending more in recessions, and increasing taxes and spending less when economies threatened to over-heat – they could stave off economic downturns. Essentially, Keynes was arguing that governments could and should manage their economies and create economic stability and prosperity, by acting in a counter-cyclical fashion.

Keynesian economics was probably the most influential economic theory for the broader left-of-center, both in the U.S and in Europe, other than Marxism, of the 20th century. For New Dealers and members of the British Labor Party, and even for more moderate or conservative people like Henry Luce of Time Magazine, Keynesian economic policies seemed to offer a solution to all of the problems of capitalism, the constant booms and busts, and in exchange provide perpetual prosperity. Moreover, Keynesianism offered this solution as a resounding affirmation of public action – not only was perpetual prosperity possible, but it would be governments, not the private sector, that would provide it. Keynesianism quickly became one of the cornerstones of liberal and progressive public policy.

How does this all tie in with public employment? Well, to begin with, public employment advocates shared many of the beliefs that Keynes held – that the problem of the Great Depression was that there was insufficient demand for goods (what public employment advocates and other New Dealers called insufficient purchasing power), that governments could act directly to reverse this, and that the way to end the Depression was to spend a lot of money to increase demand. As Harry Hopkins and the people who worked for him in the WPA argued, public employment was a proven way to spend a lot of money very fast, that the money flowed straight into the pockets of working class people who had lost their purchasing power (and therefore, their ability to translate their potential demand for goods into effective demand) when they lost their jobs. Hopkins and the administrators of the WPA and similar programs became enthusiastic advocates for Keynesian economic theory and Keynesian economic policy, using the ideas of Keynes as justification for increasing federal spending and the budgets of the WPA and similar programs.

Now, one of the most important divisions in WWII-era liberalism became a key issue. Liberals who favored Keynesian theories nonetheless disagreed over how to implement them into public policy and split into two camps: fiscal Keynesians and social Keynesians.

Fiscal Keynesians focused on Keynes’ arguments about the importance of interest rates (and spending) on economic recovery, and argued that you could implement Keynesian policies through the "fisc and the fed" – the Federal Reserve and the normal spending of the government (with a strong preference for using interest rates before spending). Essentially, the government could indirectly manage the economy by lowering and raising interest rates appropriately, thus stimulating investment (and ultimately jobs and economic growth). If necessary, the government could increase economic spending, but that should be a last resort and in any case done through more traditional channels such as tax cuts or contracts. This would allow for economic management with a minimum of interference with the free market – the government wouldn’t have to grow or spend money for "socialist" programs.

Social Keynesians emphasized much more strongly the importance of spending and a larger government presence in the economy, including regulation of corporate behavior. In their view, the kind of spending was important in and of itself – government had to spend money in ways (preferably through government programs) that directed the money to working class people who lacked purchasing power, as this would have the broadest impact on demand; moreover, the private sector on its own would never provide the kind of full employment needed, so the government would have to intervene on its own (by providing public employment and constructing public works, by supporting unions and by establishing min. wages and max. hours laws); finally, social Keynesians argued that the government shouldn’t just spend more money in the same way that the private sector did – government spending should flow to areas and people that the private sector neglected, providing things like housing for the poor, health care, and social security benefits.

Naturally, public employment advocates were fiercely committed to social Keynesianism, since it was the theory closer to their own beliefs – although public employment advocates did argue that, beyond issues of increasing economic demand by spending, public employment further showed that the government could modulate key economic variables like the unemployment rate directly. This all came to a head in 1945-1946, when the Full Employment Act was introduced into Congress.

The original draft of the Full Employment Act was a strongly social-Keynesian piece of legislation. The bill proposed to formally commit the United States government to achieving full employment as a matter of standard economic policy, and to establish for all Americans the "right to a job." (At the time, most government officials and Keynesian economists believed to be somewhere between 1-2.7% unemployment, since there would always be some people who were in-between jobs, not working because they were in school or caring for a relative, etc.) Further, the bill required the President to submit a "Full Employment Budget" to Congress each year, in addition to the normal federal budget – this budget would provide an estimate for the employment rate for the next fiscal year given current trends, and if that rate was lower than full employment, to recommend the necessary policies and spending levels to reach full employment.

However, the bill was considerably watered down as it passed through Congress, in response to the concerns of conservatives and moderates who disliked the idea of government economic planning or creating the "right to a job" and the concerns of fiscal-Keynesian liberals who believed that such measures were unnecessary. The final Employment Act that was passed by the Congress and signed into law by President Truman was a much more fiscal Keynesian bill. In this version, the government declared that it would seek to "promote maximum employment, production, and purchasing power" without committing itself to achieving them, and the right to a job was stricken from the text. The Full Employment Budget was reduced to an annual economic forecast and a list of suggestions that neither the President nor the Congress was obligated to pay attention to much less enact into law. In no small part because of this defeat, social Keynesianism became rapidly eclipsed by fiscal Keynesianism, which solidified its status as the dominant theory of post-war liberals, especially in the Kennedy and Johnson years (for more on the importance of this, see Judith Russell’s book, Economics, Bureaucracy, and Race on the influence of fiscal Keynesians on the Great Society and the War on Poverty). The WPA, which had outlasted many New Deal programs and remained in operation through 1942, was not revived after the war.

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So, what are the implications for progressives today?

First, ideas matter. Public policies are immensely strengthened when they have theories that explain why and how they work, and why they are a good idea; they are likewise weakened when those theories are eclipsed by theories which explain why they are inefficient, unnecessary, or counter-productive.

Second, compromise has consequences. The decision to opt for fiscal Keynesianism over social Keynesianism had a major historical impact, both for liberal politics and policy and for the country at large. Social Keynesiansm was effectively halted for (by this point) sixty-one years. And this meant that in the 1960’s, the people who designed the Great Society and the War on Poverty excluded large-scale public employment in favor of education, social services, and job training – which limited the impact on poverty and unemployment, especially among the young and working-age people. It also meant that when fiscal Keynesianism stopped working in the 1970s and came under assault from Milton Friedman and other neo-classical economists, that liberals had no alternative policy to guide them. Notably in the 1960’s, one of the chief demands of the civil rights movement was for full-employment through public employment – the "Freedom Budget" promoted by A. Phillip Randolph and Martin Luther King Jr. was a major part of the civil rights movement’s platform, and the famous March on Washington was titled the "Jobs and Freedom March," as photographs of signs carried by participants attest to.

Third, when options are closed, so are imaginations. When fiscal Keynesianism became dominant, both experts, public officials, and voters alike were convinced that the most that government could do was to tinker around the edges of the American economy. Today, we’ve restricted ourselves even further, such that in 2004, when Democratic presidential candidates spoke of the need to "grow jobs...build jobs...make jobs," all they could think of to do so was to create tax credits and funds to lend money to businesses. Hopefully, by using history to remind ourselves that the options open today are not the only options available, we can begin to reverse this.

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EDIT: Damn, can't believe I forgot to add this point. In a previous diary I had mentioned that John Maynard Keynes was one of those who had missed the difference between public employment and public works, and I had intended to explain myself here.

In many writings and speeches before and after writing the General Theory, Keynes had argued that one of the key ways that Keynesian policies could be implemented was to use public works to lower unemployment. One of the objections to this policy, and indeed one of the experiences of later implementing these policies, was that public works failed to produce enough employment. This was used by conservatives, especially during the 1980s, that using the government instead of the free market was a bad idea.

The historical irony here is that the public works programs were being blamed for something that wasn't their fault - public works directs most of its money towards the works themselves, purchasing materials and land, purchasing machinery and equipment, and what employment it does generate tends to go to people who have experience in construction, which tends to be people who are already employed. By providing extra jobs to construction and general contracting firms, public works does increase employment around the margins, when these firms hire on extra workers to meet the increased need, but it's really not large enough an effect to provide the reductions in unemployment that Keynes was looking for.

So, the point I'm trying to make here is that progressives need to be very careful about what policies we support and why - clarity of theory and practice is really important. Supporting a program because it's intrinsically worthy is all well and good, but we have to be sure that they will have the effects desired, otherwise our opponents will use the results as a weapon to attack the basic idea of government action.

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Re-Post Number 4: "WPA or PWA - Which Policy for Progressives?" (Aug 11, 2007)

Note: the following re-post moves from the mechanics of public employment policy to some of the intellectual issues that complicate the question of direct job creation. Here, the issue is whether there is an important difference between "public employment" and "public works;" my argument is that there is an important difference, and that progressives should emphasize the former over the latter as an anti-cyclical economic recovery policy.

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The difference between public employment and public works is not an easy one to grasp, and many very smart people (John Maynard Keynes for one, Léon Blum for another) have often missed the difference and advocated for one when they should have been advocating for the other. Many historians of the New Deal have been equally confused – to give a good example, Udo Sauter was particularly split on the issue: "It seems possible to differentiate between public works for relief purposes and work relief, he wrote, since "according to one definition, the former term would designate "needed public improvements," which may have been advanced [in time] to provide employment, but which must have been undertaken in the near future regardless...work relief, by contrast, would consist of "operations definitively undertaken to provide employment." However, Sauter then argued that this distinction was essentially artificial, since both programs involved building and both were intended to provide for employment. At first glance, this pronouncement seems reasonable: both policies involved the hiring of workers and the production of certain goods, both directed their workers to manufacture similar goods (buildings, roads, bridges and tunnels, and so forth); indeed, both policies drew their funding from the same bills and were carried out by agencies with similar initials.

However, I would argue that public employment and public works have to be seen as contrasting policies that, during the era of the New Deal struggled over funding, political support, and popular prominence, and that should be seen as distinct. Beyond the immediate level of competing bureaucracies, public employment and public works had important policy differences in regards to focus, effect, results, and method of administration.

To begin with, public employment’s focus was on employing people, while public works’ focus was on the end product of their labor; this difference would inform decisions made by administrators seeking to suit limited budgets to their programs focus – would they spend their last $100 for the month on three workers’ salaries or 75 bags of cement? These kinds of decisions would greatly affect how much each program would affect the economy and in what ways. Moreover, focus also became an important influence on how these programs perceived the Great Depression. Administrators of public employment programs tended to see the crisis through the lens of mass unemployment, and concluded that the road to recovery would be to bring unemployment down to "normal" levels. Public works administrators tended to emphasize the shocking decline in production and investment and argued that the best way out of the Depression was to use government dollars to re-invigorate America’s "core industries" – construction, steel, concrete and brick-making, lumber, and tool and machinery production being just a few of these.

This contrast carried over to the programs’ intended effects. Public employment officials believed their programs would impact the economy through its effects on people – first, by preventing outright starvation among the unemployed; second, by reducing the impact of mass unemployment on wages; and third and most importantly, by directing purchasing power into the hands of a population that had been unable to be consumers for some time, expanding demand while redistributing income and goods towards the lowest economic bracket. By contrast, public works officials believed that their programs would aid recovery by addressing the needs of industry. Public works orders would provide a baseline of demand to keep factories open, but even more so, the public works themselves would speed up the process of economic development – dams would bring new energy sources (both water and electricity) into rural areas, kick-starting the modernization of agriculture, and opening up new markets through the extension of modern transportation systems into remote areas.

The two programs’ results were also different. While both emphasized construction, public employment officials favored light construction, which favored large workforces and could be done without the need for heavy machinery or large amounts of materials. Light construction thus tended to produce goods suited to the needs of the urban public – schools, hospitals, libraries, city halls, airports, post offices, city streets, and housing. Public works programs tended to produce goods more suited to improving the nation’s economic infrastructure – electrical power generation, irrigation, national highways, large-scale bridges and tunnels, and so forth. These "public goods" not only had a close connection to the goals and intended effects of the program, but also had an impact on the two programs’ constituency – public employment tended to draw the support of the unemployed and the low-wage working class, while public works tended to draw the support of construction firms, contractors, and skilled workers, especially in the building trades.

Finally, public employment and public works used very different mechanisms to produce their "public goods." To create their light construction projects, public employment officials overwhelmingly used what is known as force account – the direct hiring of workers by the government, in this case with the Federal government as the employer of record. This technique gave public employment officials much more control over how many new jobs were created (and just as important who got them) in which areas, the wages and working conditions of those jobs (which often had serious impacts on local labor markets), but it also meant that the Federal government had to deal with the problems of managing workers with widely varying levels of skills, literacy, and experience. Public works administrators, on the other hand, in no small part because heavier construction required more investment in machinery, tended to build their projects by contracting out to private construction firms. This simplified the process of hiring workers, assured a level of skill and oversight over the construction process, and provided much needed business to a vital American industry. However, it also had its problems – contracts tended to provide work to the already employed, diminishing the potential impact on unemployment. Furthermore, the government had much less say over hiring, the conditions of employment, given the intervening layers of contractors and subcontractors.

As has been suggested, these technical differences tended to have ideological or intellectual consequences, as programs naturally gravitated towards political economies that validated their purpose. Public employment was more suited to, and open to, political economies that emphasized demand-side solutions to the Depression, redistribution of income, and more direct government involvement in the economy. Public works was likewise more attracted to political economies that emphasized growth, economic development, planning, and government stimulation of the private sector.

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So what does all of this historical theorizing mean for progressives today?

First, progressives should understand what different policy options should or are suited to do, and approach them as parts of a toolbox, and not one-or-the-other solutions. Public works, like building or repairing or maintaining the massive bridges across the Mississippi that we have seen are in urgent need of renewal, are not the best means of fighting unemployment, economic stagnation among the working class, or poverty. Similarly, public employment functions best when the majority of its funds can go towards payroll instead of towards the expensive machinery, materials, and land that are required for the heavier kinds of construction. However, there shortcomings – or as I would argue, specializations – are just the flip-side of advantages.

The strengths of public works are producing large-scale public goods that work to improve our national infrastructure (bridges, tunnels, and highways), provide important services like electricity, or defend us against natural disasters. The strengths of public employment are reducing unemployment, increasing purchasing power, and creating more real-estate-and services-type public goods – things like housing, schools, libraries, post offices, hospitals, and roads.

The two approaches complement each other, as public works creates the larger institutional frameworks that spur economic growth and economic opportunity and public employment provides the support to workers and consumers to turn that institutional opportunity into prosperity for all.

Second, progressives should think of policies not just as good in and of themselves, but as over-arching and inter-connected processes that shape the society and economy we live in. For the last thirty-odd years, Americans have been taught to be pessimistic about the ability of the government to effect change in our lives – you can see this in editorials that say that presidential policy has little impact on the economy, or pundits who assume that market-based approaches are the only efficient option possible. However, the truth is that the government can and does make a huge difference in our economic and social lives.

The next step towards building an effective progressive agenda is learning to visualize the economy and society we want to have, and seeing different policies as ways to achieve parts of that. Used correctly, public employment can give us a high employment, high wage economy; used correctly, public works can give us faster and cleaner transportation, cleaner and cheaper electricity, and a safe reliable infrastructure.

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Re-Post Number 3: "A WPA in 2008: 1 Million? Or 4 Million?" (Aug 09, 2007)

Note: In this re-post, which follows directly from the second, I tie the issue of direct job creation policy to a larger political argument I have with certain members of the Democratic Party about negotiating strategy. In short, I think that one of the problems with the Democratic Party at present is that, in order to seem "reasonable" and "moderate," we propose legislation that gets us 50% of what we want, and then we end up with 25% or nothing. I believe that we need to start with 200% of what we want to end up with 100%.
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Hi,
In my last diary, I laid out a brief overview of what Senator Edwards' job plan would cost, what it would produce, and what it would look like. In this installment, I'm going to look at some hypothetical plans for job programs, and make the case that progressives, including but not limited to Sen. Edwards, should push for a larger number of "stepping stone" jobs.

At the moment, Sen. Edwards' plan calls for the creation of one million public employment jobs. This is, of itself, a perfectly acceptable number, given the levels of cost, production, economic effect, and so forth that it would have. However, I'd like to make the case that progressives should consider increasing that number, both for policy reasons and political reasons.


First off, the policy reasons. One of the ways that public employment works in terms of producing economic results is through multiplier effects - in terms of wages, when the newly hired workers spend their wages, it tends to prompt businesses to take the extra receipts and use the money to expand their businesses with new machines/workplaces/workers and pay their workers more (theoretically); in terms of employment, when you pull newly-hired people out of the ranks of the unemployed, it decreases labor supply, which tends to push wages upward. However, in order to affect something as large as the American economy, size does matter. The larger a program, the more of an effect it will have, and there is a certain threshold below which it won't really have an effect.

So, a one million-strong would have the effect of decreasing unemployment from 6.8 million people (4.5%) to 5.8 million people (3.8%). This is historically low, comparable to the height of the economic boom in 2000. However, it's questionable whether this would have enough of an impact on wages, which have seen almost flat growth in recent years despite relatively low unemployment. It we increased the size of the public employment program to, say, three million jobs, we'd get a drop in unemployment to 3.8 million (2.5%) which is comparable to the height of the post-WWII boom, and is much more likely to produce positive wage growth.

Moreover, the effects on poverty would be much greater. As I argued in the last installment, a one million-strong jobs program could bring 2.59-3.14 million people out of poverty, which reduce poverty by 7.2-8.7%, bringing the total U.S poverty rate down to 11.1-10.9%, which be the lowest since 1972. A three million-strong program could bring 7.7-9.4 million people out of poverty, which would reduce poverty by about 20-26%, bringing the total U.S poverty rate down to 9.7%-9.2%, which would be the lowest rate ever recorded in American history. To give some transnational perspective, reducing the poverty rate to 11.1-10.9% would bring our poverty rate down to only a little more than the Netherlands; reducing the poverty rate to 9.7%-9.2% would bring our poverty rate down to somewhat less than Ireland's. These numbers do not include the effects of expanding EITC, establishing universal health care, and other anti-poverty measures.

The economic effects of a larger public employment program would be considerable. In addition to the halving of the unemployment rate, this reduction’s effect on the overall economy, and the addition of some $60 billion a year in new wages to consumption, the production of goods and services would be considerably greater. A three-million-strong public employment program would cost approximately $80 billion a year, and produce approximately $141 billion a year, for a net profit of $61 billion a year (40%). Thus, public employment, on its own, would increase economic growth by 1.3% a year. This point is worth emphasizing: the American government, by intervening directly in the economy, would increase economic growth rates by 1.3%.

I’ve given you the numbers, but let me explain what this means in terms of ideas: for the last thirty years, Democrats have often been accused of not having an ideology or a set of principles they stand for. I would argue that rather Democrats had been made to believe that the principles they stood for didn't work as policies and were politically dangerous, but that's a topic for another diary. The important thing is that many Democrats internalized two major parts of the neoconservative/neoliberal message: that the public sector is inherently inefficient and can't offer solutions (only the private sector and the free market can), and that the government is essentially incapable of creating economic change. We see these beliefs spread wide throughout the world of politics, academia, and journalism - just look at the articles that say that "presidents are blamed for the economy, but do little to affect it."

What large-scale public employment would do would show Democrats, and hopefully voters and journalists as well, that the public sector can in fact provide solutions to major problems facing Americans, and that economic policy can in fact dramatically reshape the American economy. Moreover, it's the kind of policy that ties itself right into our ideas and ideology in a simple and clear fashion: we can believe that the government works, so Democrats can go out and argue that we are the party that believes in using the government to help ordinary Americans (as opposed to the Republicans who believe in billions for the rich, but not a penny for ordinary Americans), and make the argument that Democratic economic policy can provide jobs, economic opportunity, and rising wages - and that Republican policies can't.

Public employment would be our version of cutting taxes: Republicans believe in less government, and that provides a straight path to a policy of cutting taxes, which becomes the public conception of the Republican agenda (Republicans want to cut taxes, cut spending, fight wars). For us, it would be Democrats believe in active government, so that leads to a policy of acting to provide jobs, which becomes the public conception of our agenda (Democrats want to create jobs, provide free health care, establish peace). All of the sudden, everyone (including Democrats) know what Democrats stand for.

Second, in terms of politics, one of the problems that Democrats have had in recent years is that we have tended to propose our programs at 100% of what we want to achieve, or in an effort to appear reasonable or moderate, we lower our initial offer to something closer to 50-75% of what we want to achieve, and then in the normal legislative bargaining process, we get knocked down even further. Republicans have traditionally not done this - instead, they've started at 200% of what they want or think they can achieve, and then Democrats negotiate them down to something closer to 100%, and then we congratulate ourselves for forcing them to moderate their demands.

The first Bush tax cut was a perfect example of this - the Republicans opened with an offer of $1.6 trillion dollars, which was the biggest tax cut ever, and Daschle, et al. bargained them down to $1.3 trillion and congratulated themselves for pushing them down by $300 billion when really the Bush administration had got the bulk of what they wanted.

So even if progressives only want 1 million public employment jobs, they should ask for 3, so that when they get bargained down, the end result is big enough to have the kind of impact on American poverty rates and the American economy that they hope to achieve. In general, this should also be our policy on all legislation, from health care to taxes to environmental policy - come in at 200% to get 100%.

To offer a historical parallel: one of the worst policy mistakes made by a progressive happened in 1937, when FDR decided to show that the New Deal "had worked" and was no longer needed, and so balanced the budget by drastically cutting (more or less stopping) all of the spending programs - the WPA being the most prominent. The private sector hadn't actually recovered to the point where it could do without the government pumping money into the economy, and the economy went into a recession. Roosevelt realized his mistake, and put together a budget that restored the cuts, and more or less got the economy back to where it had been in 1937 (with economic production recovered, and employment partially recovered) by 1939-40. In the mean time, FDR had lost the major pillar of his political strength - his claim to fame that his policies were actually aiding recovery. As a result, FDR lost all opportunity to push for things like the Hospital Insurance Act of 1938 (which would have provided contributory coverage for hospital visits for American workers). (And yes, the court-packing scheme did also hurt his political position; the recession, however, made a setback a catastrophe)

The morale: appearing "reasonable" isn't worth it, being victorious is.

In my next diary, I'll be discussing the difference between public employment and public works, and the importance this has for Democratic economic and social welfare policy.

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Re-Post Number 2: "What Would a Modern WPA Look LIke?" (August 8, 2007)

Note:

This post comes a day later than the first, when I shifted from talking about the historical issues involved and started doing a little policy-blogging. What's interesting here from two years out or so is how the numbers for poverty and unemployment look good compared to the current day.

So below you will find some of my earliest thinking about how direct job creation would actually work:

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In my last diary/blog post, I talked about learning about Sen. Edwards' job plan and my own research into the historical roots of public employment.

Today, I thought I'd share a rough idea of what a modern public employment program would cost and what it would produce and what it would look like.

In my next diary, I'll talk about the potential released by a larger public employment program than the 1 million suggested by Sen. Edwards.


Note: for the purposes of full disclosure, I'm not a trained economist. If I've made an error in my statistics or my economic assumptions, please feel free to correct me.

To begin with, I'm using Senator Edwards' proposal for 1 million "stepping-stone" jobs as my baseline, as its one of the more concrete of the current presidential candidates' proposals on creating public employment jobs. Let's say for the purposes of argument that Senator Edwards' plan would create 1 million public employment jobs. If we were to offer a salary of, say $20,000/year (approx. $10.50/hr) plus health insurance, which is not a great salary but not awful either, that would provide significantly more than the minimum wage and according to the current U.S poverty line (which I know if not very accurate), just about over the poverty line for a family of four.

In terms of cost, I've worked it out that Edward's proposal would cost $20 billion a year in payroll (assuming an avg. salary of $20k/year), so figure $30 billion total a year when you throw in land, materials, overhead, and so forth (historically speaking, the WPA's total non-labor budget was approximately 20% of the total; here, I've estimated 30% to be on the safe side). In budgetary terms, that's extremely doable without affecting the deficit to a degree that causes significant inflation.

In terms of the impact on American society, those one million jobs created, assuming an average household/family size between 2.59-3.14 (the difference is largely due to counting single households), could bring 2.59-3.14 million people out of poverty, which reduce poverty by 7.2-8.7%, bringing the total U.S poverty rate down to 11.1-10.9%, which be the lowest since 1972. This in in and of itself would be a major social and economic policy accomplishment, probably one of the greatest in the last thirty years.

In terms of what you could do with those jobs, quite a lot. The roughly two-million-worker-strong WPA's building program over the eight years of its operation included the construction of 116,000 buildings, 78,000 bridges, and 651,000 miles (1,047,000 km) of roads and the improvement of 800 airports. That works out to what, 14.5 thousand buildings, 9.75 thousand bridges, 81 thousand miles of road, and 100 airports a year? Keep in mind, that's with 1930's levels of productivity, skills, and technology.

With modern productivity, even assuming that the unemployed people who are hired have half the average productivity of the American worker (the average American worker produces approx. $90,000 a year in goods and services), we'd still produce public goods and services to the tune of $47,000/year per worker, for a grand total of $47 billion produced per year. Deducting the cost of running the program, and you're still adding $17 billion to the economy that wasn't there before (a net profit of approx. 30%)- just in untapped labor power.

As to what this program would look like, I'd point you back in the direction of the public employment programs of the New Deal. When the New Deal established public employment programs, they created a kind of "movement culture" that resembled that of the new unions. Workers on public employment programs showed a huge rebound of morale after dispiriting years after years on the unemployment line - famously, one woman told a reporter "my family isn't on charity. My husband, he works for the government."

People who worked for the CWA and later the WPA founded their own newspapers where they described themselves as an "army of the unemployed" who would "slay the dragon of the Great Depression through work." In New York City, for example, the administrator of the CWA (Civil Works Administration) was so dedicated to his work of providing jobs for some 250,000 people, that he actually worked himself to death in the winter of 1933. The New York City's CWA TIMES printed a banner headline "KILLED IN ACTION" and compared the administrator to Leonidas of the 300 Spartans at Thermopylae.

Workers in the CWA and WPA formed the Worker's Alliance, a union of the publicly-employed, who marched in the streets on behalf of their program and their work. In my research into these programs, I came across an envelope in the CWA correspondence archives in the FDR library in Hyde Park, which was filled with photos that workers on a CWA project in Pennsylvania had sent President Roosevelt of themselves building the stone wall of a library as a thank-you present for giving them jobs, and the look in the faces of these men, wearing fedoras and collared shirts to look their best even as they posed with wheelbarrows of bricks and trowels and hammers in hand, was one of great pride and joy, and a real sense of comradeship.

More on the potential of a larger public employment program in my next diary.

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Re-Post Number 1: " The WPA and Sen. Edwards' Million Jobs - Historical Legacies of the New Deal" (Tue Aug 07, 2007)

Note:
As part of a collection effort, I present the first in a series of posts formerly written as diaries on DailyKos, all focused on the theme of public employment policy. Each post will be preceded by a short comment explaining the context of the original piece.

In this first case, "The WPA and Sen. Edwards' Million Jobs," dates back to mid-May 2007, when I was first getting interested in the candidates for the 2008 presidential election. I had been feeling much more positive about politics since the 2006 midterms, when Democrats had taken over the Congress, and was starting to look around at who I would support.

Keep in mind that this was back during the days in which Barack Obama was a little-known politician, who I mostly knew for giving a good speech at the 2004 National Convention and beating the tar out of Alan Keyes in a race for the U.S Senate. Hillary Clinton was the odds-on favorite to win the nomination, and I knew I didn't want her as the party's nominee. As a New Yorker who had seen her 2000 campaign and her subsequent political shift to the right, I didn't think that Hillary could be the kind of unapologetically progressive candidate I was looking for. Obama, at that time, was still in the proecess of molding his platform, his argument, and his strategy, and was still in the more extreme phase of his "post-partisan" stance. This didn't really appeal to me.

Instead, I was interested in Senator John Edwards. I hadn't really liked him in 2004 - I supported Howard Dean - because of his then pro-war stance, but I had liked his "two Americas" rhetoric, and had preferred him against Kerry. However, it was his public policy positions in 2007-8 that got me to support him.

So here's the first post to be brought back into the light, warts and all:

Hi,

This is based on a blog entry I made on Edwards' blog in May, that I thought I'd repost here to add to the discussion of the WPA [ed - Works Progress Administration] going on in other blog/diaries. Just to introduce myself, I'm a graduate student in the history of public policy writing a dissertation on the history of public employment in the United States, with a central focus on the WPA.


Anyway, back in March, I had been an Edwards supporter for a while, but I was motivated to post about this on his blog when, challenged by some friends of mine on an email-listserv (I know, very quaint), I was asked to detail Sen. Edwards' poverty plan. Somewhat chagrined that I didn't know the details off the top of my head, I went back to his site and checked it out. (This was back when the plan was relatively new, before the tour and so forth).

Imagine my total surprise when I found that one of the first items on the page was the creation of 1 million temporary jobs for the unemployed. You see, my research subject, the topic I'm writing my dissertation on, is the history of public employment in the United States, beginning with the creation of the Civil Works Administration in 1933 through to the demise of CETA in the late 70's-early 80's.

As both a scholar and an activist, I have in my day-to-day life been making in the case that public employment - the direct hiring of the unemployed by the government to reduce unemployment and produce useful public goods and services - was the heart and soul of the New Deal in its day (Social Security being the most lasting and most important part since then), that it was the distinctively American approach to the welfare state, and that it was a truly successful program that should be the cornerstone of the Democratic Party's politics and policy, but was buried due to racial prejudice, fears of Communism, and business' desire for a monopoly on labor.

Indeed, I had just finished my first major piece of research on this topic, a study of the Committee on Economic Security (the committee that drafted the Social Security Act of 1935) arguing that public employment was the major competitor to the limited system social-insurance that was proposed, that it was a much more sweeping, inclusive, and original intellectual development, and that it was seen by the Committee as the critical policy that would extend the New Deal to all Americans (including women and blacks), fill in the gaps in the safety net, and ensure the fiscal wellbeing of the system, while preventing dependency and promoting work.

What I found in my study of the CES' archives was that many of the members of the committee had been officials from Harry Hopkins' Federal Emergency Relief Administration, veterans of the Civil Works Administration (a precursor to the WPA that employed 4.2 million people from the winter of 1933 through the spring of 1934), and were all advocates of public employment. These officials pushed for a vision of a social welfare state in which jobs, not welfare or unemployment insurance, would be the lynch-pin of protection against poverty. Essentially, any American who was without work or who had lost their job would have the right to apply for a public employment job.

Not only would this job stave off poverty by providing wages to the worker and their family, but it would also help to reinforce the Social Security system by keeping the drain on Unemployment Insurance low or preventing the need for it altogether, by ensuring that the newly-employed worker would continue contributing to Social Security (thus maximizing the in-flow to the Social Security coffers), and by ensuring that Americans "not normally eligible" for social insurance would build up participation in the system (namely domestic workers and agricultural workers, the majority of women and African-Americans in the work-force). Finally, the idea was that public employment would provide political cover for the rest of the Social Security program by emphasizing that FDR's new system would emphasize work over "the dole."

Moreover, the FERA advocates argued that the public employment program alone would act as both social welfare and economic policy. Public employment would directly reduce unemployment, boost the purchasing power of the average American and therefore consumption of goods, and set off a positive-multiplier effect throughout the economy at large. Thus, whereas social insurance would act to deflate the economy, public employment would re-inflate the economy and promote economic recovery. Moreover, public employment would serve to re-distribute wealth from the richest tax-payers to ordinary workers. But most importantly, public employment would do so in a way that returned value to the tax-payer - public employment workers would provide labor in exchange for wages, producing goods and services that would offset the cost of the program and increase economic growth, while improving the national infrastructure.

Little known today, the final Social Security report recommended public employment as the "first objective of reform." A public employment bill appropriating $4 billion dollars for the program was introduced nearly simultaneously to the Social Security bill, and was passed at about the same time. Yet today, few associate public employment with the achievements of the New Deal, let alone with Social Security.

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