The Unemployment Epidemic
posted by: Cynthia Samuels 25 days ago
By Zach Carter, Media Consortium
On Friday, we learned that the U.S. unemployment rate officially broke 10% for the first time since the early Reagan years. This is about as bad as it gets for a modern, developed economy. No economic force takes a heavier toll on a society than rampant joblessness, and few personal setbacks take a deeper psychological toll than being out of a job for months on end. If Congress and President Obama don’t do something to create jobs fast, both are going to pay a hefty political price when next year’s mid-term elections roll around.
So how bad is it? In October, the economy shed 190,000 jobs and the unemployment rate jumped from 9.8% to 10.2%. That percentage is the most optimistic reading of the labor market in Friday’s report. If you take people who want full-time jobs but are settling for part-time work, then add those who have simply given up on finding a job, the rate is a massive 17.5%.
The problem is not that either Obama or Congress have failed to act on the problem, but rather that they have not done enough. When Congress was moving on Obama’s $787 billion economic stimulus package back in February, we were shedding upwards of 700,000 jobs a month. So the stimulus package has worked—it’s probably helped keep unemployment from jumping to 12% or 13%. But this is cold comfort to the nation’s 15.7 million unemployed, 5.6 million of whom have been out of a job for more than six months.
As Robert Reich notes for Salon, Obama’s economic advisers dramatically underestimated how bad things would get when they crafted the stimulus package. As a result, the package was too small and unemployment has remained high. Obama needs to go back to Congress and demand more economic relief funding. Republicans will continue to whine about government spending to excuse their obstructionism, of course, and conservative Democrats will probably start sweating, too—Sen. Ben Nelson (D-NE) helped cut back the original stimulus bill in February to help boost his “centrist” credentials. This of course had nothing to do with economics or policy. Government spending is what saves the economy in a recession. In a downturn as severe as this one, it takes a lot of spending to turn things around.
But as Reich notes, Nelson and his cohorts will have a lot more to worry about in the 2010 elections if the economy doesn’t actually improve over the next year. And few economists think it will. The Congressional Budget Office, which is run by a conservative economist named Douglas Elmendorf, projects an average unemployment rate of over 10% in 2010. That’s worse than this year. Democrats from swing districts need to support economic relief packages. Continued economic malaise will severely hurt them at the polls.
Congress finally took some action on joblessness on Thursday, voting to extend unemployment benefits for an additional 14 weeks. If we want the economy to recover, we need people to spend money, but if people aren’t working, they don’t have any money to spend. So the government cuts people checks to help them get by and stimulate a demand for goods and services. Even most conservative economists thinks this is a good idea.
But as Kevin Drum notes for Mother Jones, the soundness of the policy did nothing to prevent Republicans from fighting the effort to extend benefits tooth-and-nail. The bill had to overcome three—that’s right, three—filibusters in the Senate from Republicans, who held up the bill for weeks for no apparent reason. In a blog post for The Washington Monthly, Steve Benen explains the economic cost of this obstructionism: In the weeks of delay, 200,000 people looking for work stopped receiving benefits.
But extending unemployment benefits will not solve our economic woes. The total program is just $2.4 billion, a drop in the bucket compared to the trillions of dollars the government put up to salvage Wall Street. $2.4 billion is not enough to reverse the unemployment trend. Cutting the checks certainly helps, but as Matthew Rothschild emphasizes for The Progressive, we need an economic policy that actually puts people back to work. We’ve known for months that the stimulus was too small and watched the labor market continue to deteriorate. We need more than tweaks at the economic margins, we need a robust job creation plan.
As Stephen Franklin notes for Working In These Times, we already know that the recession has created a significant jump in the nation’s poverty rate. According to official government statistics, the rate climbed from 12.5% to 13.2% in 2008, the largest increase since 1991. But the National Academy of Science thinks the government statistics are misleading, as they account for rising costs associated with medical care, transportation, child care and different regional living standards, as Franklin notes. Taking these factors into account, the National Academy of Sciences calculates the actual poverty rate to be 15.8%. That’s an additional 7 million people living in poverty, for a total of over 47 million. That’s more than the entire population of the New York, Los Angeles, Chicago, and Philadelphia metropolitan areas combined. What’s worse, we don’t have poverty statistics for this year, when the most severe economic damage was been dealt.
Workers are facing tough economic prospects around the world. Writing for The Nation, Kristina Rizga details Latvia’s economic turmoil. Just like the US, overexcited bankers in Latvia inflated a massive real estate bubble that took down the entire economy when it burst. But with the bubble burst, much of the country is now out of a job and stuck with a mortgage worth far less than what they paid for it. It’s almost exactly the same story we’ve seen at home.
No domestic economic problem is more pressing than our epic levels of unemployment. We need another round of stimulus to get people working again. If not, we’ll see the same public unrest here as in Eastern Europe.
This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. This is a project of The Media Consortium, a network of leading independent media outlets.
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underestimated what the stimulus would create, r u kiddin' me??? ha ha, this is a joke, right? ask those who got billions for the 9000 earmarks of pork barrel spending, that our congress now in power, tucked into the bill, yeah ask em all how it has worked out for them, (the tax-payer account raiding scum!!!...ha (!) under-estimation?...the economy in this country is still tanking...and will continue to do so...for a long darn time, that is transparency to me!!! i see lots of numbers here, lots of percentages/mathematics...but it doesn't take a 'rocket scientist to see the truth...this ain't quantum physics ya know!
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while most of these numbers have been occluded, as the facts began to emerge (kucinich was first to expose this in congress, one of the handful of decent men in that bribed, er, donor-bound body), the total outlays and guarantees to the exact financial criminals who schemed this global economic disaster is now at the unbelievable sum of $16.2 trillion. in the worst case scenario, that could rise to as much as $22 trillion. and something else we aren't being told that this is all 'air money' and just plain debt. now corporate-communist bush gave his ultra-rich core constituency $10 trillion in tax cuts through 2012, then tripled the national debt to $12 trillion while borrowing $3 trillion from the communist party of china! so now, add that $16.2 trillion to$12 trillion and what you have is $28 trillion and still rising. that's a household debt of $320,000. got that kinda dough lying around? soon the bailed out banks will come back to foreclose on us all?
obama voted for all the war fundings, patriot axe, surveilance and onhis 2nd day in office authorized the continuation of CIA's rendition program of outsourced torture worldwide... he also backed bush's giveaway to the corporatists and half of the 'stimulus' went to even more tax cuts for the comfortable... not one penny to SBA for startup businesses in a nation needing 20 million NEW JOBS! nope, but $19 billion to electronic health records...
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Fine, go to www dot examiner dot com, business and finance, and look for my name, or click Find Examiner and look for me as the Norfolk Investment Examiner.
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Sending a Green Star is a simple way to say "Thank you"
You cannot currently send a star to Jim because you have done so within the last week.
Jim, I just wrote an article in a series covering the real estate collapse that adds to your point. The unreported, for the most part, role of the Federal Gov't in the housing crisis drove up the costs of living. Here's an excerpt, and, if I can make it work, a link to the full article on Examiner dot com.
"Homeowners have numerous tax incentives when compared with those that rent. Regardless of whether your home is a single-family detached residence or a condo, townhouse, or duplex, the US Government wants all Americans to own a home. This is demonstrated by the tax incentives that have been in the tax code for over 75 years. During that time, most tax incentives became even better with alterations to the tax code in 1997 and the years since then. Most of these incentives also apply to a second, or vacation, home."
One of the largest single areas of tax incentives in the Federal Income Tax Code is real estate, which is one of the main reasons why so much money went into this one asset class and created a bubble that may take years to absorb. Here's the link, if I did it right.
http://www
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When Fed/Government policies fix prices in core costs,or raise those cost through inflation and bubbles there are two major consequences. 1. Efficient producers are not rewarded as their weaker competition is effectively subsidized. This inhibits lower costs/efficient production. That is well known. Less well understood is 2; the effect on Labor.
One of the reasons the US labor force is disadvantaged is because of higher living costs. As an example,when housing prices surged, and the naive cheered, US labor was taking the greatest hit it had taken in decades. Housing is a CORE cost of labor. You have to live somewhere, right? If labor has to pay more for housing (and associated costs like property taxes), then in order to live, labor has to make more. This makes the labor side of production more expensive. Jobs are produced/drawn to EFFICIENT production costs....and have gone elsewhere. So, "our" Government nailed labor twice. Once by protecting inefficient producers. And then again by monetary and fiscal policies that raised the cost TO labor....... Say "thanks" to the Government. THEY sent the jobs away. And DON"T ask the Government for a solution. The Government is clueless.
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I'm getting old, already said that earlier, didn't I.......
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It is interesting how businesses are generally blamed for unemployment rising. Government, and the attitudes that elected officials at all Federal levels exhibit in interviews, speeches, and planned legislation, is the primary cause of business pullbacks.
If you own, or manage, a business, your biggest single area of expense is salaries and benefits, depending on the industry. As our leaders discuss major spending initiatives and plans to shift costs to the "rich", the "rich" become concerned about their ability to stay in business without cutting expenses. According to research by Thomas Stanley, author of the Millionaire Mind and the Millionaire Next Door, the "rich" are probably not who you think they are. The majority of American millionaires drive a pick-up that they bought used and use it in their small business. They didn't get where they are by not anticipating expenses and they are responding to the increase in Gov't as anyone else would.
Businesses generally cut the largest area of expense, employees, until their net after-tax revenues justify hiring, or keeping, their employees.
If you want to lower unemployment, then hope that these leaders begin to talk about cutting back on gov't spending and lowering taxes. As businesses become less concerned about expenses rising from all the programs that they will, doubtless, be asked to pay for, they will hire again.
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Margaret when I read your post I thought I was reading one of my own!! You and I believe in the same things.
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Roger H....great post. You speak the truth.
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The most important thing we could do to decrease the unemployment rate is balance the federal budget. Our ever increasing federal debt is being funded by Treasury bills that are being purchased mainly by foreign countries, mainly China. Do you ever wander why we import so much from China? It is to pay their share of the interest on the national debt. Our trade agreement with them has raised our unemployment rate and boosted their economy by allowing our factories to close and so they can produce more imports so we can continue to pay the interest owed them on the national debt. Until we balance our federal budget and begin to actually pay off our national debt (like President Clinton was trying to do with his final budget) we will continue to lose manufacturing jobs to foreign countries.
The health care bill passed by the House will also raise the uunemployment rate by forcing the small businesses in our country to reduce their workforce to offset the cost of providing mandatory healthcare to their remaining workers. They have already been hit hard by the recession and are running on a shoestring budget now until the economy improves and the unemployment rate starts to go down and more people feel secure enough in their jobs to start buying things again.
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