A remarkable thing has happened: The Democrats have reacted to our economic problems on a scale that actually matches them. Liberal economic commentators pointed to $3 trillion as the minimum amount necessary to ensure a swift recovery from the Covid-19 pandemic and the resulting recession. And now President Joe Biden’s administration has passed a $1.9 trillion stimulus plan, on the back of a $900 billion package approved in December. Senator Bernie Sanders wasn’t exaggerating when he called the American Rescue Plan “the most significant piece of legislation to benefit working families in the modern history of this country.” It’s extraordinary how different the political reality is from 12 years ago, when Barack Obama struggled to get an $800 billion stimulus through Congress. Even at the time, most economists knew that his recovery bill was insufficient.
Today, unlike in 2009, the Federal Reserve Board is in vocal support of the need for new spending and has pledged not to undercut the recovery by prematurely raising interest rates. Conservatives, for whatever reason, aren’t focusing on these stimulus packages. Perhaps the nature of the pandemic shows us how we all need government support—as opposed to the 2008 financial crisis, when many policy-makers thought that federal spending was just about bailing out the banks.
Yet for all the things that are different, a few remain the same. There’s a continuing threat that Republicans and conservative Democrats will try to steer the economy away from full employment, which could sabotage the recovery just as it’s taking off. For this reason, it’s essential for the White House to think in terms of a very specific number: 9.5 million new jobs. That’s the number needed to return to where we were on the eve of the pandemic. The goal should be full employment, but getting back to the labor market that existed in late 2019 is a crucial first step. Anything less will be a missed opportunity.
There are many reasons to aim for full employment, but the economic benefits of a tight labor market alone justify the target. Prior to Covid-19, unemployment had been below 4 percent for nearly two years and hovered around 3.5 percent for last six months of 2019. Throughout the Great Recession, economic policy-makers in both parties assumed that getting unemployment so low for such an extended period would be impossible without causing inflation and other problems. This led to a misguided focus on how workers weren’t ready for the available jobs—too busy playing video games to be employable, as conservative economists would later complain. Yet by the end of 2019, there was clear evidence of sustained wage growth across the lower end of the income distribution and of rising employment among people who had been incarcerated or otherwise isolated from the labor market. Tight labor markets give workers power and help to make sure that they are better compensated.
But even before the coronavirus outbreak, the recovery wasn’t complete. The Black unemployment rate, for instance, remained elevated at 6 percent. And this highlights a second reason to stay focused on the 9.5 million jobs number: There will be many attempts to shut down getting to full employment before we are there. This fall, we’ll probably see a few impressive monthly reports for job numbers, which will prompt a strong urge among some policy-makers to declare “Mission accomplished.” There are even those who believe the economy was too hot in 2019, and they’ll want to slow down the long-term trajectory. At that point, the administration could turn too quickly to other priorities, abandoning the emphasis on maintaining the recovery.
The last reason to shoot for 9.5 million new jobs is political. Getting to full employment—or at least close to it—shows the essential role that government plays in providing for economic well-being. The economy doesn’t naturally heal itself. The government must take action to bring down unemployment. We saw this over the past decade. Even though Donald Trump was broadly unpopular, he polled more favorably at handling the economy than the Democrats. Despite his economic policy failures, which made conditions worse for workers and better for corporations, the experience of continuing low unemployment made a big difference for voters. And it is precisely these voters whom the Democrats will need to build an enduring base in the coming decade.