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Is Another Wave of Mass Layoffs Imminent?

Is Another Wave of Mass Layoffs Imminent?

by Zach Carter, Media Consortium Blogger

After months of modest gains, the U.S. economy lost 125,000 jobs during June. That’s the worst jobs-related news this year. Without serious action soon, the struggling U.S. economy is going to get even uglier. Unfortunately, President Barack Obama’s economic team was slow to recognize the severity of the jobs crisis, and now seems unable to get Congress to actually do something about it.

As David Corn notes for Mother Jones, the recent jobs data is actually much worse than the 125,000 figure implies:

“The economy needs about 150,000 new jobs a month to keep up with population growth and new entries into the jobs market. It needs a lot more than that to make up for the 8 million or so jobs lost in 2008 and 2009.”

Recession 2.0

Although the economy sluggishly recovered from the catastrophic events of late 2008, economists are warning of a “double-dip” recession in which mass layoffs return. So why is Congress refusing to deal with the jobs crisis in the face of such terrible economic conditions?

Part of the problem, Corn notes, is that Obama didn’t do a very good job selling his economic stimulus package to the public. The bill, which Obama pushed through in early 2009, really did improve the economy—it’s the only reason why the unemployment rate is hovering around 10 percent instead of 12 percent or 13 percent. But by refusing to counter Republican attacks on so-called “wasteful spending” included in the package, Obama failed to show the public how much good the stimulus has done. Instead, the bill is widely perceived as another wasteful giveaway to special interests and akin to the bank bailout.

Spending is stimulus

In reality, government spending is the best way to stimulate the economy during a deep recession. It makes up for the shortfall in spending from consumers who have lost their jobs.

There are all kinds of ways the federal government can spend money to create jobs, including extending unemployment benefits to laid-off workers, providing funding to states to allow them to hire more teachers and cops, and hiring people to build roads and buildings. The government did all of these things with the stimulus package from early 2009, but it didn’t do enough of any of them. The stimulus package was simply spread to thin.

Roots of recession

As Robert Reich explains for The Nation, the recession itself was created by deep economic inequality. By 2007, the wealthiest 1 percent of Americans made 23.5 percent of the nation’s total income. Figures like that had not been seen since 1929, when the richest 1 percent made 23.9 percent of the nation’s total wealth. All of this concentration at the top means that the elite enjoy a disproportionate share of economic gains, but it also sets the entire economy up for massive shocks.

When the rich have all of that money, they have to invest it somewhere. When the majority of citizens are seeing sluggish wage growth, or even a drop in wages, as the U.S. experienced during the Bush years, there aren’t enough valuable assets out there that can absorb that investment. As a result, rich people put their money in speculative asset bubbles. When those bubbles burst, the entire economy can come crashing down, as it did in both 1929 and 2008.

Rampant inequalities around the globe

As Melinda Burns highlights for AlterNet, rampant inequality in not unique to the U.S. More than half of the world’s population lives on less than $2 a day, and decades of conservative economic policies have been unable to reverse that hardship.

One of the best ways to relieve global poverty is also one of the most intuitive—give money to the poor. Brazil has made an aggressive push to cope with widespread poverty by providing $31 billion in pensions and grants to the poor every year. As a result, the nation’s poverty rate has declined from 28 percent in 2000 to 17 percent in 2008, while child malnutrition was cut in half. These policies make good economic sense. When poor people have money to spend, they spend it and fuel growth that benefits the entire economy.

Social insecurity

And yet in the U.S., Obama is seriously considering cutting Social Security in order to reduce the federal budget deficit. As Margaret Smith emphasizes for In These Times, Obama has created a bipartisan “debt commission,” and packed it full of ideologues from both political parties who have been fighting for years to slash Social Security.

This doesn’t really make sense, because Social Security is funded by its own dedicated tax revenue, and is sitting on a multi-trillion-dollar surplus created by those taxes. It really can’t do much to reduce the deficit. With interest rates at record lows, lawmakers do not currently have any reason to be worried about the deficit. But if they wanted to take action on it, they’d have to deal with long-term issues like the rising cost of health care, the bloated defense budget and absurdly low tax rates on the rich. Cutting off income for senior citizens won’t help.

Blocking economic stimulus won’t help

And neither will efforts to block short-term economic stimulus. But Obama’s emphasis on the budget deficit plays into the hands of Congressional opportunists who want to block his economic recovery efforts. If we’re told over and over again that the real economic problem is the budget deficit, no money is going to be dedicated to problems like jobs—even if that money would actually help the government’s fiscal position by fueling economic growth.

The American economy is in the middle of an absolute employment crisis. Without strong federal action, it’s going to get worse.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint.


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Photo used under Creative Commons License via Flickr with thanks to aflcio

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57 comments

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8:17PM PDT on Aug 26, 2010

Build massive alternative energy that we can produce at home, NOW. Even if it increases the debt it will pay off in the long run. It will also be very stimulative, especially if government gives substantial tax breaks to producers and consumers of all renewables.

To hell with Shell!

10:55PM PDT on Jul 17, 2010

get the illegals out we may have a chance????????

10:34PM PDT on Jul 14, 2010

Please get out and vote so the president can at least try to help this country...instead of dealing with people who just want to make political hay...

6:25AM PDT on Jul 9, 2010

Dylan, I do not take your posts wrong and find no disrespect....I am gratefull for intellegent debate that does not lead to personal attacks. All to often those that have views that differ do not take the time to really understand the reasons why they hold different views. Wouldnt the world be a more enlightend place if all people who hold views that may not be the same could hold reasonable debate? Thank you for yours!!!!

1:46AM PDT on Jul 9, 2010

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6:30PM PDT on Jul 8, 2010

Thanks for the info.

4:21PM PDT on Jul 8, 2010

shannon please don't take my posts wrong, i mean no disrespect.

4:09PM PDT on Jul 8, 2010

shannon you are right, GATT and NAFTA were the decline of both manufacturing and unions and the middle class. GATT and NAFTA were the most powerful union busting, middle class busting tools at the disposal of corporate america.
as far as the PATCO strike. the reason PATCO went on strike was because reagan spoke at their convention and promised if they supported him he would reform the industry, PATCO was the only afl-cio affiliate to endorse reagan. after he was elected he went back on his word and PATCO went on strike. yes it was unfortunate. reagan could have forced the air controllers back to work without breaking up the union. in the end reagan put the industry in danger by firing highly skilled air controllers and replacing then with on the job training unskilled workers.
my original point and i stick to it, unions aren't the problem right now, that is an old republican myth. you can't use the unions as the scape goats in this day and age. they are just too small of a percentage of the workforce.

1:34PM PDT on Jul 8, 2010

Shannon S wrote: "My belief is the decline of the middle class is because of the decline in manufacturing and NAFTA, which yes..does effect union members but many other people as well."

You are 100% right ... To see the truth in this statement, all you have to do is reverse it. What is fueling the economic growth in China? -- MANUFACTURING! Their increase in jobs, the growth of the middle class & upper classes is a DIRECT RESULT OF THEIR MANUFACTURING!

They GAINED ... We LOST!

Same with India -- For example: we outsourced telecom jobs over there ... US workers lost their jobs here!

11:41AM PDT on Jul 8, 2010

As long as we have this clown as our president and bonobos in congress backing this clown, unemployment will skyrocket.

"Recession" is when your neighbor loses his job.
"Depression" is when you lose yours.
"Recovery" is when Obama loses his.

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