Why a Working-Class Revolt Might Not Be Unthinkable

By MARK THOMA, The Fiscal Times

September 13, 2011

 

It was encouraging to see President Obama pivot from deficit reduction to job creation in his widely anticipated speech last week. The president proposed a combination of spending and tax reduction policies, and he surprised many people with the boldness of his proposals and his passion and commitment to the issue. Unfortunately, Obama’s plan is unlikely to be much help to struggling labor markets. Fourteen million people are unemployed, long-term unemployment remains near record highs, the ratio of job seekers to job openings is 4.3 to 1, and the employment to population ratio has dropped precipitously. While concerns over the deficit are valid for the long run, they shouldn’t prevent us from doing more to help the jobless. (The debt dilemma is predominantly a health-care-cost issue, and whether or not we help the jobless doesn’t much change its magnitude.)

The real problem is the political atmosphere. Republicans may go along with doing just enough to look cooperative rather than obstructionist -- but no more than that. And the job-creation policies that emerge from Congress are unlikely to make a dent in chronic unemployment. In fact what emerges won’t be anywhere near the $445 billion program the president has called for, which itself is short of the dramatic intervention needed to really make a difference.I don’t expect we’ll get much more help from the Fed either. There is quite a bit of disagreement among monetary policymakers over whether further easing would do more harm than good, and inflation hawks are standing in the way of those who want to aggressively attack unemployment. As with Congress, the Fed is likely to adopt a compromise position and do the minimum it can while still looking as though it is trying to meet its obligation to promote full employment.

Thus, despite the President’s newfound interest in job creation, and the call from some at the Fed to treat unemployment the same way they would treat elevated inflation – as though “their hair was on fire” – the actual policies that come out of Congress and the Fed are unlikely to be sufficient.
 
It’s time for this to change. The loss of 8.75 million payroll jobs since the recession began should be a national emergency. But it’s not, and the question is why. Why has deficit reduction taken precedence over job creation? Why is our political system broken to the extent that a whole segment of the population is not being adequately represented in Congress?



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