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Unemployment Fueling Political Storm: Is Obama Doing Enough?

Unemployment Fueling Political Storm: Is Obama Doing Enough?

Unemployment figures in the U.S. are staggering: The official rate stands at 10.2%, the highest in 26 years. A broader measure that includes people who are involuntarily working part-time or who have given up looking for work is at 17.5%. That’s a full-blown economic emergency.

But, as Joshua Holland explains for AlterNet, President Barack Obama’s response to the unemployment crisis has not matched the urgency of his response to the crisis on Wall Street. This isn’t just unfair, it’s bad economics.

“It’s important to understand that the economic crisis in which we find ourselves is not just a function of a shaky financial system but of a crash in consumption that’s come along with the evaporation of $14 trillion worth of the wealth of American families,” Holland writes.

Widespread joblessness can be every bit as damaging to the economic structure as a financial crisis. When people are out of work, they buckle down on household expenses. When several million people cut back at the same time, the economic machine grinds to a halt. If people are not buying and selling stuff, the economy isn’t working.

As Mary Kane explains for The Washington Independent, about 40% of families don’t have enough money to cover expenses through a three-month stretch of unemployment—even if one member of the household is receiving unemployment benefits. Kane highlights a Brandeis University study that reveals the haggard state of the American household and the unfair distribution of wealth along racial lines. A full 66% of African-American and Latino families can’t afford three months without work. At a time when 5.6 million workers have been jobless for at least six months, the study highlights just how dire finances have become for many households.

GRITtv’s Laura Flanders discusses potential labor market remedies with economist Dean Baker andThe Nation’s John Nichols. Baker suggests a work-share arrangement, in which employers cut back on their workers’ hours to allow more people to work. To prevent losses for households, the government would step in and pay for the shortfall in hours. Employers would have more part-time jobs available, but the government would make sure everyone was paid as if they were working full-time. Baker also endorses a public jobs program, which he says could be especially useful in cities like Detroit and Cleveland that have been hit particularly hard by the economic downturn.

Nichols highlights the political consequences of failing to fix the unemployment mess. Unemployment directly affects the lives of voters. If widespread joblessness persists through November 2010, Democrats will net huge Congressional losses. If Obama thinks it’s hard to garner bipartisan support for his legislative priorities now, imagine a few dozen more Republican obstructionists.

It’s not that Obama failed to respond to the unemployment crisis. He did. That’s what the stimulus package was all about. Today’s 10.2% unemployment is a catastrophe, but it would be more like 12% without the stimulus package. But, given the seriousness of the issue, Obama is not giving unemployment enough attention.

In fact, Obama’s economic priorities are a mirror-image of his campaign promises, as Robert Scheer argues in both a column for TruthDig and an interview with Amy Goodman on Democracy Now! After talking tough about reining in recklessness on Wall Street and making the financial system more accountable, Obama has hired many of the very policy makers who pushed through the deregulatory agenda back in the 1990s. Top Obama administration officials like Larry Summers, Timothy Geithner, Gary Gensler and Neal Wolin helped make this mess in the first place.

“This is not a minor criticism,” Scheer says. “I think the guy is betraying his own presidency.”

Obama’s timid efforts to rein in Wall Street and heal the ailing job market are setting the stage for a political disaster. If Obama and Congressional Democrats can’t take strong action to fix the economy, they will find themselves with much narrower majorities next November. The economy, and the public institutions that support it, are supposed to work for everyone, not just the financial elite.

This post features links to the best independent, progressive reporting about the economy by membersof 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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By Zach Carter, Media Consortium

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47 comments

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10:31AM PST on Dec 8, 2009

Right on; economists from both sides of the aisle, from Krugman to Galbraith, seem to agree on a few salient points:

Targeted tax cuts are the most stimulative economic boost government can provide on the macro-Keynesian scale (in this case, I mean targeted for the middle class not more corporate welfare of recent infamy). On the micro side, it is just amazing that we are not providing lending liquidity to small businesses and families, even unemployed or homeless people, which successful programs like Yunnus' in Bangladesh and India have pioneered – a self-sustaining model with no public cost. America is not foundering because other economies are rising, we are dying from a deficit of ideas.

Here we've consigned trillions in guarantees to giant investment banks who don't even lend to the public, and our Middle Class is slowly suffocating. It's about as subtle as a sledgehammer that both political parties have sold out to globalized corporations - Clinton did to some extent and GW cubed it; and Obama, who started with such hopes, has soft-pedaled the bankers, the insurance industry, and the energy companies - starting his 'reform' proposals with major concessions to all of them. That's NOT how you negotiate on behalf of the people against entrenched interests! You start with a huge counterstroke and let the lobbyists pull you back - that's what LBJ and Nixon did.

I support the President, but he has not responded fully to our emergency.

3:16AM PST on Dec 7, 2009


Jonathan Y, couldn't agree more.

For many years, tax cuts have been portrayed as benefiting the rich at the expense of everyone else. This congress and this administration are the first, since Roosevelt, to take that philosophy and implement it by using Gov't stimulus in an attempt to directly provide jobs. It is not working, and now they are debating doubling down by creating a "Stimulus 2".

JFK, Reagan, Clinton, and W Bush, all cut taxes and leveled or reduced gov't spending to create jobs. It worked each time. Until our current administration and congress learn that, or until they can be replaced, we will be learning basic economics the hard way.

For those that are interested, here's the US Bureau of Labor Unemployment Rate Chart.


http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=LNS14000000

Obama and Congress are doing the best they can, but because their philosophy is that Gov't is the direct provider of jobs, their best actually produces the opposite of the intended effect. Stimulus 2 will not make things any better and companies will not be hiring until they are confident in the future. Health care legislation and other spending bills will only make unemployment wor

6:38PM PST on Dec 6, 2009

There is a simple and cheap start to a major jobs program: tax breaks for alternative energy produced domestically. Why not provide major tax credits, say up to 100%, to consumers who buy such technology, and companies who currently produce it? Solar and wind have become more cost-effective. With massive tax breaks, and improvement of power grid infrastructure, this could be very stimulative to the economy at modest public cost. Look what America did when the internet was tax-free: business proliferated there and major new corporations like Amazon and Google were born. We should be doing the same with alternative energy.

5:35AM PST on Dec 6, 2009

Here in the UK unemployment figures are also atrocious!
What jobs there are, are being taken by immigrants flooding the UK! It`s crazy, hundreds being made redundant and yet more and more people are coming here!
I think there will be real trouble on the streets, there`s bound to be a backlash!

6:57AM PST on Dec 3, 2009

Simply put, either BO lied or those "cigarettes" he refuses to give up are full of ground up peyote buttons. Perhaps both!

6:11AM PST on Dec 3, 2009

Obama has a lot of charisma, and yes he walked into a mess. Unfortunately, his actions, or mopre properly, lack of action, has been a let down.

The banking crisis: Why not "de-toxify" those bad mortgages instead of dumping truckloads of money on the bank's front steps. Forcing some re-negotiations would have saved a lot of mortgages. Now the banks are making money and handing out bonuses. (out tax money...) People are still losing their homes. Thanks Barack!

Immigration and jobs: We have huge unemployment, and have 7-9 million illegals taking jobs that Americans will do. We are also importing 1 1/4 million new legal immigrants/yr to compete with American workers. Clearly, Obama cares more about cheap labor and the hispanic vote than the American worker.

The health care bill: There is a lot of good stuff in there but... No cost controls? No verification of citizenship for benefits? No realistic cost accounting? No thanks! Get it right!

"Free trade": We outlawed slavery in this country, but allow corporations to move jobs to where there is (virtual) slavery. We have enviornmental regulations, but allow companies to pollute in other countries and sell their goods here. Has Obama done anything to get us out of "free trade" agreements and into "fair trade" agreements? NO!

Obama has spent too much time at 30,000 feet, he needs to see what is happening on the ground.

6:01PM PST on Dec 2, 2009

Expanding our national service options would be a good stop-gap.

1:50PM PST on Dec 1, 2009

Carole D, I agreed with a lot of your comment but wanted to ask about the tax cuts for the rich. If the rich paid a higher share of income taxes, meaning that the portion of total income tax revenue paid by the rich got bigger, would you still feel that those tax cuts should be eliminated?

As to the bankers, I'll be happy to spring for the rope. Can we throw congress in, both parties, as well?

10:55AM PST on Dec 1, 2009

Our current unemployment problem has been percolating for years. It started in the seventies when many manufacturing jobs started fleeing the country, and it continued in the eighties with many tech jobs going overseas.

Government policies for the last few decades have led us to point of destruction. We have to stop giving tax brakes to companies that export plants and jobs, we have to stop the H1-b visas and other programs that bing foreign workers to the U.S. For instance, we allow a million legal immigrants into the country every year. We also need to implement a sane universal health care plan. Many jobs go to high-wage countries because of their health care, that makes it cheaper for American companies to do business.

Trade agreements like NAFTA and China's favored-nation status have cost millions of American jobs, and must be either corrected or ended.

Obama didn't start this mess, but he isn't doing enough to correct it. Stopping the wars and rescinding the Bush tax cuts for the rich would allow plenty of money to create programs like the WPA. The war in Iraq and the tax cuts are responsible for more than half of the deficit.

Obama promised to correct the trade agreements, create a good system of health care, end the wars and rescind the tax cuts. He hasn't done any of these things. He has only helped people who don't need or deserve help. The damn bankers should be strung up by the family jewels.

8:57AM PST on Dec 1, 2009

Obama, is definitely not perfect, but I dont think any one else could be doing much better. I dont care what side of the fence you sit on. He did walk into an utter mess. The housing market was crumbling before he step foot in office along with credit cards jacking rates up. My personal health insurance had gone up twice before he stepped into office. People being laid off by the thousands started before he went in to office too. I just dont get how any one, rather it was Obama or McCain could stop such a huge landslide like the one that was falling on him. If one could slow down the processes of total collapse that is doing something. Is it perfect, no. But no one can please every one. And NO one can just stop it. The president , regardless of who, is not the one who started this and is not the only one responsible for all of the mess, did we already forget about our neighborhood banks that we trusted so much, and health insurance companies, or drug companies.

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