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The Correct Answer for America

By William E. Spriggs | 12/20/2013, 11:41 a.m.

This time of year college students cram for final exams. They get graded in a very stark right-or-wrong fashion. Splitting the difference between a bad guess and the right answer is not rewarded.

Unfortunately, Washington is locked in such a crazy struggle. Five years after Wall Street’s fall, the economy still is more than 1 million payroll jobs short of where things stood at the last peak of the labor market. Median household income is still below the peak, meaning more than half of America’s households are behind where they were five years ago.

The poverty level of America’s children is higher, and state and local revenues only recovered last fiscal year, leaving hundreds of thousands of fewer teachers and larger class sizes for our children. Our nation’s total output is more than $1 trillion less than where it would be if we could get to full employment. Clearly, the right answer to this set of problems is for massive government action to kick start the economy to address the woes of the American people.

But what we have is a Washington elite preoccupied by its fetish with federal deficits, and a Republican party blinded by ideology to shrink the government to the size the 1% is willing to pay for (meaning not very much at all). There is such a disconnect between Congress and the problems of America’s households that whatever President Barack Obama might do is stuck in the muck of policy group-think.

The last employment numbers only encourage a group-think that believes the economy is doing well. November’s numbers boosted the average monthly job growth to a level that could get private-sector jobs back to their January 2008 peak within six months-in mid-2014. But rising to the job levels of more than six years ago means that would leave the deficit of all the new job entrants over that six-year period-almost 8 million jobs needed!

Unemployment is like landing on fly paper. It is easy to get stuck. From one month to the next, the majority of the unemployed remain unemployed. Of the nearly 10.7 million people looking unsuccessfully for work in October, 6.7 million remained unemployed in November. More give up and drop out of the labor force, quitting their searches-2.4 million-than leave unemployment by finding a job, 2.1 million; and unfortunately, 1.6 million people who had been employed in October joined the rank of the unemployed in November. For millions of people we are simply not addressing the immediate need to create job opportunities.

After weeks of deliberating, Congress appears to have reached a budget compromise. Fortunately, it makes a sizable portion of the sequestration cuts in federal spending go away, making the federal government less a drag on the economy. It will help create more jobs but only a tiny dent. And it is being done by punishing federal workers-both civilian and military-by reducing their retirement benefits. And federal unemployment benefits are set to expire for 1.3 million still stuck in the unemployment queue, leaving them with no relief.

Back in October, there were 2.87 unemployed workers for each job opening. This is why more than 4 million Americans remained unemployed for more than 27 weeks. The loss of income for these families is a strain and part of the reason household incomes remain below their peak of five years ago.

The Congressional Budget Office has shown that unemployment benefits help stimulate the economy more than any other government program. It is only common sense. Unemployed workers need to make rent or mortgage payments, buy groceries and pay utilities. With the fall in income from a job loss, all unemployment benefits are put to use. And, unlike a tax cut that a Wall Street broker might use to go take a ski trip to St. Moritz, those grocery bills and utilities are dollars that circulate in the local economy.

A compromise that splits the difference between not extending unemployment benefits and choosing to extend them is moving away from the right answer. As the bumper sticker says, “I’d agree with you, but then we would both be wrong.”