Sure, April saw nearly 250,000 jobs added to the economy, but unemployment is back up to 9 percent and black unemployment is over 16 percent. And still no jobs bill. What gives? Why has it been so hard to get major initiatives on the table in Washington, D.C., despite what is plainly a crisis? Over the summer, we’ll be exploring that question in ongoing posts. We’ll ask about the political and institutional barriers and explore the real and imagined limitations of the feds in job creation. Most importantly, we’ll try to highlight the big job creation ideas that are languishing on the political shelf.

In late 2007, before the recession was announced—if you’ll recall, officialdom didn’t admit the economy was in recession until nearly a year after it began—talks between economists, Democrats, and Republicans on Capitol Hill eventually led President George W. Bush to sign a stimulus bill, in early 2008.

“If you go back to that time, I think we were worried that the unemployment could get up to 6, or maybe 7 percent,” says economist Lawrence Mishel, president of the liberal Economic Policy Institute. “There was bipartisan effort to stimulate the economy when we were worried about 7 percent. Now we’re at 9 percent,” he adds—but now no one cares.

Chad Stone, an economist at the Center on Budget and Policy Priorities, argues that unemployment has fallen away as a real priority because Washington politicians are now caught up in a short-sighted argument over the budget deficit.

“The idea has caught on in this town that we have to cut spending really quickly to address a perceived budget crisis,” Stone says, but “cutting spending immediately goes in the wrong direction for solving the jobs crisis.”

Mishel agrees. “The first step toward deficit reduction is unemployment reduction,” he says. “Why do we have a large deficit? We have a large deficit because we have a large recession. A lot of people aren’t paying taxes because they aren’t working, so there’s a loss of revenue from the recession.”


He adds that spending on recession-related social services, like food stamps and unemployment insurance, will fall sharply once the recession is truly over—in all communities rather than just on Wall Street—which would quickly reduce the deficit. Cutting social services now isn’t a solution, Mishel says. “It’s not true that you can do deficit reduction and create jobs. In a recession, job creation has to involve deficits.”

This month, the Republicans released their jobs plan, which amounted to a repackaging of their favorite hobbyhorses—lowering taxes on the wealthy, repealing the Affordable Care Act, and cutting crucial domestic spending. A day later, House Democrats released their own jobs plan, which is a mix of self-congratulation over previously passed legislation and a list of current bills that they say will create more American manufacturing jobs.

On the GOP plan to cut taxes to stimulate job creation, Stone says it just won’t work. Employers aren’t hiring because “there’s not enough demand for goods and services. They’re already sitting on piles of cash. They don’t have the customers to justify [hiring more workers].”

Both Stone and Mishel argue for more stimulus money as a way to put cash in the pockets of consumers, which would increase demand for goods and then encourage employers to hire.

Meanwhile, Republicans and Democrats can’t even agree on the Small Business Bill, a piece of legislation that would have extended funding to small business owners

If anything is clear, it’s that the economy is about as far away from full employment— which is considered to be around 5 percent—as it has ever been. And it gets worse for people of color. Black men have 18 percent unemployment—double what white men face. Black women have 13 percent unemployment to white women’s 7 percent. Black and Latino teens face 35 percent and 29 percent unemployment, respectively.

Stone had praise for the Federal Reserve’s efforts, which include keeping interest rates low and engaging in “quantitative easing” (also known as printing more money), but he says that “there are a lot of inflation hawks around,” who are against easing.

Still, “both the fear of an immediate debt crisis and inflation are overblown,” Stone says. “One is hampering government policy and one is hampering monetary policy.”

*This post has been altered since publication.

Read this online at http://colorlines.com/archives/2011/05/deficit_hawks_preventing_job_creation.html


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