When it comes to the economy it sometimes feels like all of Washington—from President Obama to members of Congress to the brains at Treasury—is stuck in an episode of Lost. Theirs is an alternate reality where the indicators all point up and the recovery is so robust that it’s time to cut spending. In this parallel universe "our economy is getting stronger by the day"; that’s what President Obama said when the Labor Department released its May jobs figures. But for the 15 million unemployed Americans hunting for jobs that don’t exist, this is simply not the case, and it’s not, in fact, what the numbers indicate either.
Yes, the president’s recovery plan successfully stopped the economic free fall he inherited. But it’s becoming increasingly clear that even with the stimulus, the labor market is in the midst of an L-shaped recession. In May the economy added 431,000 jobs, but more than 95 percent of them were temporary Census positions. At only 41,000 new jobs, the private sector barely grew at all, and at a much slower rate than the 100,000 jobs per month economists say are needed just to keep up with new workers entering the job market (sorry, college grads!).
The hole is deep. According to the Economic Policy Institute, even if employment grew at the rate it did at the height of the ’90s boom (2.6 percent annually), we wouldn’t see pre-2008 levels of employment until January 2015, in the middle of Obama’s second term—if he has one. Every moment the president spends in denial of the problem jeopardizes his chances for re-election. And it looks as if the situation will only get worse; stimulus spending is now peaking, and brutal cuts at the state and local levels are already negating its effects. Zombie banks still aren’t doing much lending, and no one knows how far the economic turmoil in Europe will spread.
New action by Congress to create jobs is more than justified. But standing in the way is the increasingly loud conversation about the coming debt crisis, championed by the president’s bipartisan deficit commission, stacked with deficit hawks and amplified by the mass media, which uncritically ring the deficit alarm bells.
But deficits, for all the scare stories, are not an immediate emergency. We still need to put people to work. And we should be prepared to see deficits increase in the short term in the interest of creating jobs that will sustain the economy in the long term. Voters understand this—74 percent think Congress should put benefits and health coverage for unemployed workers ahead of deficit reduction. The Fed’s Ben Bernanke does too; he told Congress on June 9 that now is not the time to cut spending and that the economy "may need more assistance."
In December, the House passed a $150 billion jobs bill, but it can’t get a hearing in the Senate. This year, Representative George Miller introduced a $100 billion bill for state, local and public service hiring; it hasn’t gotten a vote in the House. Even an extension of unemployment insurance and healthcare protection faces conservative obstruction. There are signs that the administration is rousing from its slumber; the president is reportedly lobbying the Senate on the jobs front. But it has yet to put forth a proposal as robust as is necessary. The AFL-CIO, for example, has a $400 billion jobs plan financed by a financial-speculation tax and a tax on banks. That, at least, would send the bill for the crisis to those who caused it.
A new jobs bill is morally right, politically savvy and smart economics. If Democrats can’t see this, then come November they really could be lost.
