Weekly Audit: Why Are Unemployment Benefits A Major Political Fight?

by Zach Carter, Media Consortium blogger

Congress finally authorized an extension of unemployment benefits on Wednesday, providing a critical lifeline to families across the country and an absolutely essential boost to the economy.

But with the jobless rate hovering near 10 percent, minimum measures like unemployment benefits shouldn’t be a source of controversy. Lawmakers should be debating big-picture jobs packages to get people back to work, not drips and drabs that keep a worst-case-scenario from getting unbearable.

As Annie Lowrey notes for the Iowa Independent, Senate Republicans blocked the unemployment benefits bill for two months, causing benefits to lapse for 2.6 million Americans. That’s a humanitarian outrage. When people don’t have access to this minimal support, they can’t pay bills or feed their kids. There is no excuse for anyone in a position of power to cut off access to such basic social necessities. So what’s the hold up?

It’s a mix of talking points and public misconception. Conservatives have been demonizing the unemployed and using erroneous claims about the federal budget deficit as an excuse to block unemployment benefits, and that narrative has been reinforced by President Barack Obama’s handling of the public debate over the economic stimulus package approved in February 2009.

Unemployment Benefits = Economic Stimulus

In addition to the humanitarian imperative, there’s a broader economic case for extending unemployment benefits. When people are out of work, they can’t spend money. If people don’t spend money, businesses can’t sell anything. And if businesses can’t sell anything, they have to lay off more workers. Putting money in the pockets of the unemployed isn’t just a humanitarian necessity—it also prevents layoffs and creates jobs.

But you wouldn’t know it from the economically illiterate nonsense that conservatives have been spewing during the unemployment benefits debate. Writing for The Nation, Robert Scheer quotes prominent conservative intellectual Niall Ferguson. Here’s Ferguson’s vile diatribe blaming lazy, unemployed people for the recession:

“If you pay people to do nothing, they’ll find themselves doing nothing for very long periods of time. Long-term unemployment is at an all-time high in the United States, and it is a direct consequence of a misconceived public policy.”

$293 a week

Ferguson actually said that. He really believes that a major reason why unemployment is so high is because the United States pays out unemployment benefits, and that jobs would just miraculously be created if we stopped supporting the people hit hardest by the recession. And as Seth Freed Wessler emphasizes for ColorLines, Republican politicians repeatedly parroted this nonsense argument again as they attempted to block the unemployment benefits legislation.

Wessler notes that the average unemployment benefits package comes to just $293 per week. People like to feel like they have contributed meaningfully to society and be rewarded with an honest day’s pay. They do not choose to live in squalor out of laziness, as much as Ferguson might wish that were the case.

Preventing more public-sector layoffs

The economy has shed 8 million jobs since the Wall Street crash. Our job woes are a direct result of recklessness in the upper echelons of the financial sector—lazy workers did not create the recession, and they are not prolonging it.

Given the enormity of lost jobs, you’d think politicians would be considering robust programs to put people back to work—hundreds of billions of dollars in jobs programs, rather than a $30 billion extension of unemployment checks.

As Danny Schechter details for GRITtv, the economy is facing a host of major hurdles that hit families hardest. In addition to epic joblessness, we’re also facing record foreclosure numbers and state budgets that are stretched beyond the breaking point. The state situation is dire. Without federal aid, states will be forced to lay off 900,000 public employees in the coming months

That’s what makes the jobs debate so crazy. There are easy ways to prevent layoffs and create jobs right now. A quick injection of cash into state governments would have an immediate stabilizing effect. The government can’t bring the unemployment rate down to 5 percent overnight, but it can keep things from getting worse and start bringing the rate down.

Don’t blame the deficit

But, as Lowrey notes, some conservatives are not blaming the unemployed, but harping on the deficit, claiming that they’re all for benefits, they just want them to be paid for. This is a disingenuous excuse for inaction.

The conservative deficit-talk is totally misleading, and it’s the wrong way to deal with deficits. Since Republicans have been universally opposed to all tax increases, demanding that unemployment benefits be paid for means pulling spending out of other programs, which means cutting jobs in other areas (slashing the defense budget probably wouldn’t hurt the jobs picture, but good luck getting a Republican to vote for it).

The U.S. doesn’t have a deficit problem. If it did, investors would be demanding a very high interest rate on U.S. Treasury bonds. But in fact, the interest rate on those bonds is at record lows. If the U.S. did have a deficit problem, however, sabotaging jobs and growth would be a lousy way to fix it. Consider Ireland. The country had a vastly larger deficit than that faced by the U.S., and implemented draconian austerity programs. Those spending cuts hit economic growth so hard that the nation’s deficit problem actually got worse, so much worse that the rating agency Moody’s just downgraded Ireland’s debt.

If the U.S. wants to deal with deficit issues, it should address big long-term structural issues, like the enormous defense budget, extremely generous tax rates for the wealthy and the rising cost of health care. It makes zero economic sense to be attacking jobs in the name of the deficit, when doing so only makes the deficit larger.

What about that economic stimulus package?

So why can’t we get a decent jobs package? As Steve Benen notes for The Washington Monthly, much of the public uneasiness stems from misunderstandings about how the economic stimulus package passed in February 2009 worked.

The stimulus was very much a success—it kept the unemployment rate from reaching 12 percent or higher. But it was also much too small, in part because the Obama administration underestimated the severity of the recession, but mostly because Republicans created ludicrous political hurdles for the package, forcing it to shrink. Unfortunately, with unemployment still out of control, many in the public believe the stimulus didn’t actually stimulate. That’s the wrong lesson to learn. As Benen puts it:

“Imagine there’s a massive, dangerous fire. Those responsible for the blaze insist that some lighter fluid should take care of the problem, while the fire department recommends water. Forced to compromise, the fire department uses less water than is needed, and the blaze is only partially contained.”

It’s about time Congress got around to extending unemployment benefits. But in the face of the longest and most severe jobs crisis since the Great Depression, much stronger action on jobs is needed, and soon.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

 

 

Weekly Audit: Congressional Inaction Feeding Unemployment Crisis

by Zach Carter, Media Consortium Blogger

After months of modest gains, the U.S. economy lost 125,000 jobs during June. That’s the worst jobs-related news this year. Without serious action soon, the struggling U.S. economy is going to get even uglier. Unfortunately, President Barack Obama’s economic team was slow to recognize the severity of the jobs crisis, and now seems unable to get Congress to actually do something about it.

As David Corn notes for Mother Jones, the recent jobs data is actually much worse than the 125,000 figure implies:

“The economy needs about 150,000 new jobs a month to keep up with population growth and new entries into the jobs market. It needs a lot more than that to make up for the 8 million or so jobs lost in 2008 and 2009.”

Recession 2.0

Although the economy sluggishly recovered from the catastrophic events of late 2008, economists are warning of a “double-dip” recession in which mass layoffs return. So why is Congress refusing to deal with the jobs crisis in the face of such terrible economic conditions?

Part of the problem, Corn notes, is that Obama didn’t do a very good job selling his economic stimulus package to the public. The bill, which Obama pushed through in early 2009, really did improve the economy—it’s the only reason why the unemployment rate is hovering around 10 percent instead of 12 percent or 13 percent. But by refusing to counter Republican attacks on so-called “wasteful spending” included in the package, Obama failed to show the public how much good the stimulus has done. Instead, the bill is widely perceived as another wasteful giveaway to special interests and akin to the bank bailout.

Spending is stimulus

In reality, government spending is the best way to stimulate the economy during a deep recession. It makes up for the shortfall in spending from consumers who have lost their jobs.

There are all kinds of ways the federal government can spend money to create jobs, including extending unemployment benefits to laid-off workers, providing funding to states to allow them to hire more teachers and cops, and hiring people to build roads and buildings. The government did all of these things with the stimulus package from early 2009, but it didn’t do enough of any of them. The stimulus package was simply spread to thin.

Roots of recession

As Robert Reich explains for The Nation, the recession itself was created by deep economic inequality. By 2007, the wealthiest 1 percent of Americans made 23.5 percent of the nation’s total income. Figures like that had not been seen since 1929, when the richest 1 percent made 23.9 percent of the nation’s total wealth. All of this concentration at the top means that the elite enjoy a disproportionate share of economic gains, but it also sets the entire economy up for massive shocks.

When the rich have all of that money, they have to invest it somewhere. When the majority of citizens are seeing sluggish wage growth, or even a drop in wages, as the U.S. experienced during the Bush years, there aren’t enough valuable assets out there that can absorb that investment. As a result, rich people put their money in speculative asset bubbles. When those bubbles burst, the entire economy can come crashing down, as it did in both 1929 and 2008.

Rampant inequalities around the globe

As Melinda Burns highlights for AlterNet, rampant inequality in not unique to the U.S. More than half of the world’s population lives on less than $2 a day, and decades of conservative economic policies have been unable to reverse that hardship.

One of the best ways to relieve global poverty is also one of the most intuitive—give money to the poor. Brazil has made an aggressive push to cope with widespread poverty by providing $31 billion in pensions and grants to the poor every year. As a result, the nation’s poverty rate has declined from 28 percent in 2000 to 17 percent in 2008, while child malnutrition was cut in half. These policies make good economic sense. When poor people have money to spend, they spend it and fuel growth that benefits the entire economy.

Social insecurity

And yet in the U.S., Obama is seriously considering cutting Social Security in order to reduce the federal budget deficit. As Margaret Smith emphasizes for In These Times, Obama has created a bipartisan “debt commission,” and packed it full of ideologues from both political parties who have been fighting for years to slash Social Security.

This doesn’t really make sense, because Social Security is funded by its own dedicated tax revenue, and is sitting on a multi-trillion-dollar surplus created by those taxes. It really can’t do much to reduce the deficit. With interest rates at record lows, lawmakers do not currently have any reason to be worried about the deficit. But if they wanted to take action on it, they’d have to deal with long-term issues like the rising cost of health care, the bloated defense budget and absurdly low tax rates on the rich. Cutting off income for senior citizens won’t help.

Blocking economic stimulus won’t help

And neither will efforts to block short-term economic stimulus. But Obama’s emphasis on the budget deficit plays into the hands of Congressional opportunists who want to block his economic recovery efforts. If we’re told over and over again that the real economic problem is the budget deficit, no money is going to be dedicated to problems like jobs—even if that money would actually help the government’s fiscal position by fueling economic growth.

The American economy is in the middle of an absolute employment crisis. Without strong federal action, it’s going to get worse.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

Weekly Audit: Financial Reform Makes Headway, Jobs And Social Security In Jeopardy

by Zach Carter, Media Consortium blogger

Two critical Wall Street reforms, once declared dead by U.S. megabanks, are suddenly close to Congressional approval. As the House and Senate iron out the differences between their financial overhauls, it now appears that lawmakers are finally willing to ban banks from gambling with taxpayer money by implementing a strong Volcker Rule, and to end taxpayer subsidies for risky derivatives operations.

These reforms will help stabilize the U.S. economy by clamping down on the naked speculation the drove financial markets off a cliff in 2008. But while lawmakers are finally waking up to the economic and political necessity of strong Wall Street reforms, conservatives have blocked key efforts to ease unemployment. President Barack Obama also appears ready to surrender to an assault on Social Security later this year.

Derivative of what?

Lawmakers now have the political momentum to end taxpayer subsidies for the trading of derivatives, as I emphasize for AlterNet. These risky businesses helped sink big banks and jeopardize the broader economy in 2008. These reforms would be a giant step towards reclaiming the U.S. economy for ordinary citizens, and they would fly in the face of opposition from both Wall Street and Treasury Secretary Timothy Geithner.

Derivatives are the infamous financial weapons of mass destruction that brought down AIG and Enron. Many of the biggest scandals arising from the current financial crisis were derivatives operations, from Lehman Brothers’ accounting gimmicks to the SEC’s fraud suit against Goldman Sachs. By allowing traditional commercial banks to sell derivatives, the U.S. government actually subsidizes the entire market, encouraging speculation and ramping up risks across the economy.

Wall Street’s political clout stems from its derivatives machinations and its “proprietary trading,” otherwise known as gambling for their own accounts. Both provide big, easy profits that banks convert to bonuses, lobbying and political contributions.

Ending the subsidies for derivatives, and implementing a strong Volcker Rule to ban outright bank gambling would be the first major blow to Wall Street’s total dominance on economic policy, one with lasting implications for the enforcement of other new regulations, including stronger protections for consumers.

Debtors’ Prisons

Plenty of economic battles will remain after this year’s Congressional contest over Wall Street. As Annie Lowrey emphasizes for The Washington Independent, authorities in several states are actually throwing people in jail for failing to pay off credit cards and other debts. Lowrey highlights a story and study by the Minneapolis Star-Tribune which reveals that, as the recession has deepened, judges have been ramping up arrest warrants for people who don’t pay their debts. In Minnesota alone, 845 people were arrested for being in debt in 2009, up 60 percent from four years ago.

As Lowrey notes, it’s not a crime to be in debt or fail to pay it off. But debt collection agencies have still been able to persuade judges to put borrowers behind bars until they make minimum payments. This is a total abuse of the justice system and a waste of taxpayer dollars.

Sometimes borrowers just can’t pay—that’s the dominant risk involved in banking, and being able to figure out who can pay and who can’t is the job of a banker, not a police officer. Debt collectors, by contrast, purchase debts at a discount, precisely because it is unlikely that borrowers will be able to pony up. If they can’t, that isn’t the business of a criminal court. It’s the risk inherent in a business model based on scavenging.

Slashing Social Security

Other items on the economic policy agenda are looking similarly ominous. As Robert Kuttner emphasizes for The American Prospect, Wall Street tycoon Pete Peterson appears to have found an ally in the Obama administration for his lifelong quest to slash Social Security. The plan is to pull back support for seniors in the name of balanced budgets. These cuts will be totally counterproductive economically, as would the corresponding middle-class tax hike and domestic spending freeze that Peterson is pushing for.

The real fight over Social Security is still a few months away, but as GRITtv’s Laura Flanders notes in an interview with Sen. Bernie Sanders (D-VT), deficit hysteria has already infiltrated contemporary policies. Republicans and conservative Democrats are using the deficit as an excuse to deny people the most basic social services, like unemployment benefits and health care payment assistance for the unemployed.

More on the deficit “problem”

As the editors of The Nation note, there is no short-term U.S. budget deficit problem. Interest rates on U.S. Treasury bonds are at record lows. Anybody who claims to be worried about the deficit is really worried about the longer-term implications, and those longer-term issues have big-picture, long-term solutions.

The single most critical variable in budget calculations in the increasing rate of health care costs, but the bloated defense budget and low tax rates for big corporations and wealthy individuals are also a target. Skimping on unemployment benefits, or refusing federal aid to hire teachers and cops doesn’t help those long-term issues one bit.

Cutting government spending and social services during a recession seriously threatens economic recovery. When everybody is broke, the government is the only reliable source for the spending needed to support growth and employment, and it has to keep spending until things really turn around. Obama’s 2009 stimulus kept the unemployment rate from reaching 12 percent or 13 percent, but it was just too small to really turn the economy around. With unemployment at 10 percent, we need more federal support for jobs, not less.

The recent progress on Wall Street reform shows that Congress finally understands that they need votes more than campaign contributions. Lawmakers who leaves those citizens out to dry by refusing to back a jobs bill or allowing unemployment benefits to expire will be in trouble come November.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

Weekly Audit: Why Democrats Must Focus on Jobs Now

by Zach Carter, Media Consortium blogger

The job market in its worst state since the Great Depression and is putting tremendous strain on millions of Americans. Without action from Washington, D.C., the unemployment rate will remain elevated for years to come, and almost certainly above 9 percent through the end of 2010. Public esteem for economic policymakers isn’t doing so hot either. There are several simple steps that President Barack Obama and Congress could take to create jobs, but of late, neither have shown much interest in doing so.

Jobs matter

As Tim Fernholz emphasizes for The American Prospect, one of the best opportunities to repair the job market is a piece of legislation authored by Rep. George Miller (D-CA). The bill’s strategy is straightforward: Local governments pinched by the recession can apply for federal funds to ensure that teachers, cops, and other public servants are not laid off in the name of balanced budgets. Local governments that have already let employees go could apply for funding to re-hire them.

The result would be a clear win for the economy. Miller estimates that his bill could create 750,000 jobs, while the Economic Policy Institute expects the bill could create as many as 945,000. It’s also a smart political move—Obama’s political adversaries would no doubt find some way to criticize the move (they invented death panels for health care, after all), but as Fernholz notes, voters care much more about getting back to work than they do about ideological warfare or abstract bloviations about the federal budget deficit.

The deficit vs. jobs

And the federal budget deficit is no excuse for inaction on jobs. In the middle of a recession, providing funding for jobs can ultimately be deficit-reducing. More people working means more people buying goods and services. That means higher tax receipts for the government on a variety of fronts.

The deficit only matters if it is so severe that investors are skittish about lending money to the government. We would see this nervousness in the interest rates on U.S. Treasury bonds—the rate would be very high, as investors demanded a high return for the risk they were taking on. But in fact, interest rates are very low—the interest rate on 30-year bonds is currently just over 4 percent, while it frequently eclipsed 9 percent during the presidency of George H. W. Bush.

War doesn’t improve the economy

But if lawmakers wanted to take action on the deficit, there is no reason why they should do so at the expense of jobs. Congress just approved an additional $60 billion in funding for the war in Afghanistan, while refusing to provide a $28 billion for teachers in the name of deficit reduction. Congress has officially spent $1 trillion on the wars in Afghanistan and Iraq, as Robert Greenwald notes for AlterNet, wars which have done little to improve either U.S. economic or foreign policy goals:

These wars aren’t making us safer. They aren’t worth the cost, and we don’t need them. What people do need are jobs and help when they don’t have enough work or any work at all. But instead of leading on the jobs issue, they’re delaying and dissembling about the cost– while spending trillions on war.

Indeed, the failure of Congress to take action on jobs before its Memorial Day recess means that over one million Americans will stop receiving unemployment benefits within a month’s time.

Tax time

As Art Levine emphasizes for Working In These Times, spending is only half of the budget equation. The other half is revenues, which means taxes. There are all kinds of ways that the government could responsibly raise taxes and use that money to create jobs. One political no-brainer would be requiring hedge fund mangers and private equity kingpins to pay taxes at the same rates as those of other billionaires.

Thanks to a George W. Bush-era tax cut, these Wall Street titans are taxed at rates as low as 15 percent, dramatically lower than the 35 percent tax rate for rich people who make their millions in the form of salary rather than interest on investments. Levine also details a host of jobs initiatives that were ultimately axed in favor of concerns about the deficit.

Tax the speculators

As Sarah Anderson notes for Yes! Magazine, taxing financial speculation itself could help give our economy a double jolt. By taxing risky Wall Street gambling, the government could bring in billions to spend on jobs. If that tax discouraged Wall Street traders from engaging in risky gambling, the lower levels of speculation would help insulate our economy from the kinds of shocks it received in the fall of 2008.

Come November, the top concern at the polling place will correspond closely to the top concerns of consumer pocketbooks. Tough economic times will mean losses for incumbents in both political parties, but the party that does the most to create jobs will do the most to curb its losses. It will also be pursuing responsible public policy, and advancing the well-being of its constituents.

This post features links to the best independent, progressive reporting about the economy by members of The Media Consortium. It is free to reprint. Visit the Audit for a complete list of articles on economic issues, or follow us on Twitter. And for the best progressive reporting on critical economy, environment, health care and immigration issues, check out The Mulch, The Pulse and The Diaspora. This is a project of The Media Consortium, a network of leading independent media outlets.

Health Reform to Slash Deficit By $1.3 Trillion over 20 Years

Ezra Klein has the details:

According to a Democratic source, CBO has finished its work and will release the official preliminary score later today. But here are the basic numbers: The bill will cost $940 billion over the first 10 years and reduce the deficit by $130 billion during that period. In the second 10 years -- so, 2020 to 2029 -- it will reduce the deficit by $1.2 trillion. The legislation will cover 32 million Americans, or 95 percent of the legal population.

To put this in context, that's more deficit reduction than either the House or Senate bill, and more coverage than the Senate bill.

It will be worth digging into these numbers once the full CBO score is released to see, for instance, if it is still the case that roughly half of the the 32 million newly insured Americans under this legislation will be receiving coverage through a government program (Medicaid or CHIP), as well as exactly what aspects of the House legislation have been incorporated into the reconciliation package. But if these numbers are borne out, they would certainly seem to keep Congress on track to sending a final bill to the President's desk this weekend.

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