Is Education a Silver Bullet for Fixing the Economy?

Aug 3, 2012Richard Kirsch

Education is certainly important, but if it doesn't go hand-in-hand with the creation of good jobs, we'll have an economy built on quicksand.

Education is certainly important, but if it doesn't go hand-in-hand with the creation of good jobs, we'll have an economy built on quicksand.

We all know that the key to our economic future is a more educated workforce, right? Here, for example, are the “Guiding Principles” of President Obama’s education policies: “Providing a high-quality education for all children is critical to America’s economic future. Our nation’s economic competitiveness and the path to the American Dream depend on providing every child with an education that will enable them to succeed in a global economy that is predicated on knowledge and innovation.”

Now it’s certainly true that a good education is still the best ticket – other than inheriting wealth – to entering the middle class. In the simplest terms, Americans with a Bachelor’s degree or more earn more than the average wage and those with an Associate’s degree earn less. So it makes sense for us to encourage our children to get a good education. But is the president’s assertion that the path to the American Dream in the new global economy depends on providing every child with a good education true?

As an important new report underscores, if that is the only path we rely on, our economy will come up way short and so will the great majority of Americans who are striving to live the American Dream – with and without a good education.  

In Where Have All the Good Jobs Gone?, Center for Economic and Policy Research economists John Schmitt and Janelle Jones make a simple and powerful point: over the past three decades, the workforce in the United States has gotten a lot more educated and productive, but fewer of us have a good job. The standard that Schmitt and Jones set for a good job is pretty basic: earning the median wage for men of $37,000 a year and having some sort of health insurance and retirement fund at work. Of course, that isn’t a lot of money, and with most workers forced to pick up a bigger share of shrinking health benefits and pensions giving way to 401Ks, not a lofty benefit plan. Which is what makes the results of the study so striking. Even though the typical American worker is twice as likely to have a college degree than 30 years ago, the share of the workforce that has a good job declined, from 27.4 percent to 24.6 percent. The kicker here is that the decline occurred at every education level, although it was worse for those with a scanty education. But even workers with a four-year college degree or better were less likely to have a minimally decent job.  

The CEPR researchers take the data a bit further to make two compelling points. If we had not increased our educational level, it would have been a lot worse: only 17 percent of workers would have good jobs. The second point is that if job quality had kept up with increases in education, then 34 percent of workers would have a good job.

I want to throw one more scary statistic into this brew before drawing the implications for building an economy that will work for everyone: most of the jobs that will be created in the next decade don’t require much of an education. Of the 10 occupations expected to create the most jobs, eight of them require a high school degree or less. There will be almost four million job openings for retail clerks, home health aides, and the like compared with one million for nurses and college professors, the only two jobs in the 10 that require more than a high school degree.

These numbers foretell an economy where even workers with a good education are barely making it and most Americans don’t have a prayer of living the American Dream.

The guiding principle for a different economic path is making the middle class the engine of the economy. Our economic policy must be driven by a commitment to make every job a middle-class job, regardless of the educational level of the worker. That means sharing our economic progress broadly, not concentrating it among a shrinking sliver of the rich.

As the authors of Where Have All the Good Jobs Gone? point out in the first paragraph of their report, we have gotten a lot richer as a nation – 60 percent richer – over the 30 years in which good jobs dissolved. A more educated workforce, and an increase of about 50 percent in physical capital growth, led to a big jump in productivity. If that growth in productivity had been shared fairly, that $37,000 median wage would be a lot higher: $68,000 by one calculation. Even by a more modest measure, if inequality had not increased, median family income would be $9,000 more. By either calculation, if that extra income were in the pockets of Americans – instead of sitting in the investment portfolios of the super-rich and big corporations – the economy would be booming.

There are a host of policy solutions to build an economy in which our growth is broadly shared. A huge step would be to increase unionization. The manufacturing and construction workers of the mid-20th century didn’t have a high school education – they had a union. We should boost pay for low-income workers by increasing the minimum wage and enforcing wage laws so that employers pay workers for overtime and meal breaks and don’t steal their wages or pretend they are independent contractors. We need to use public dollars to invest in job creation, from construction workers to school teachers, all with good wages and benefits. And yes, we should make it possible for many more of our young people to get a good and affordable education. But whether they get that education or not, all workers should get enough to live a dignified, secure life so they can take that path to the American Dream. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

 

Screaming college grad image via Shutterstock.com.

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The Young and the Jobless

Jul 10, 2012Ilyssa Weingarden

By taking innovative steps, the government can help recent college graduates who are confronted by the most daunting job market in recent history. 

By taking innovative steps, the government can help recent college graduates who are confronted by the most daunting job market in recent history. 

As a college student, every new statistic and report on the increasing difficulty for college graduates to find a full time job terrifies me. Haven’t I done everything I was told? I worked hard in high school, applied and was accepted to a reputable university, and now I take the right classes, chose the right major, and get the right grades. I deserve my just reward: a well-paying upper middle class white-collar job in my chosen field. Right? Isn’t that what my parents and society have always promised?

Unfortunately it seems that having a college degree is no longer a guarantee for success in the way it once was. In 2000, 41% of recent college graduates were unemployed or underemployed. Today, we are at 53.6% of degree-holders under the age of 25.

Although certain fields like education and medicine have ever-increasing demand (currently 5.4% unemployment rate, not including underemployment), non-technical degrees in the arts or humanities face rates closer to the national average (11.1 and 9.4% respectively). It seems that the value of having a bachelor’s degree alone has become almost non-existent. It is only the specific skills, experience, and knowledge that a technical degree or prestigious internships provides that employers look for.

While having a bachelor’s degree does give you a statistical advantage, however slight, over those with only a high school education, it also often saddles you with overwhelming debt. The pressure to pay back student loans coupled with an increasingly depressed job market and expected wages for graduates paints a bleak future for current college students. This begs the questions: is getting a degree worthwhile? Is there a way to fix this? Can the government do anything? Should the government do anything?

It is my firm belief as a progressive that the government’s purpose is to respond to issues exactly like this one. Already the government has made strides toward making college a more realistic dream for bright kids across the country. Pell Grants and other need-based aid on the national level supplement state-specific scholarship opportunities. The next step is to focus this aid money as incentives for majors that will be viable in the current job market.

There are students at every university who choose a major solely on earning potential, and there are students that study what they love, regardless of the likelihood of getting a job post-graduation. Then there are those that are unsure, that decide on a major at the last possible moment, and these are the students who can be targeted.

Our country is in desperate need of teachers, nurses, and highly skilled engineers. We graduate thousands of virtually unemployable history and English majors every year. What if those students had monetary incentives to study what the country needs? Programs like this are already in place, like the National SMART Grant that offers money based on need to students majoring in sciences, technology, engineering, or critical foreign languages. What I propose is expanding and marketing these aid programs through the national and state levels. High school students might work more diligently in their math and science classes if they know they can have a more affordable college career by applying to engineering schools. Nursing programs that guarantee jobs after graduation have been around for over 20 years and should be promoted and expanded through government funding.

Funding for this project would involve little to no new funds, because the government could simply reappropriate money from general or merit-based scholarships to more specialized scholarships, or write new requirements into existing aid packages.

Each state should conduct research to find out which industries have the most unfilled positions and are growing the quickest, and issue grants to deserving students who study those subjects. Within a few years, the pool of recent graduates can be more streamlined and viable in the job market so students can flow seamlessly into the working world.

Other ways to make college graduates more attractive to possible employers is to encourage and possibly require greater work-study and internship opportunities at state schools. Employers are more likely to hire a candidate with real-world experience and professional skills. Policy changes on a state level would be helpful, and private institutions would likely jump onboard to keep their graduates competitive in the job market.

These solutions, while certainly helpful in the near future, will not help the current graduates who have already chosen their major and completed (or not completed) their internships. Jena McGregor suggests that a big part of the problem is employers, not the candidates. Many companies rely on software programs that rule out qualified candidates based on restrictive requirements. Candidates without experience in a very specific field can be thrown out despite being a good fit for the job.

Hiring recent college graduates or other young people without much experience can actually be beneficial for the company by exposing them to new and fresh ideas, as well as allowing them an opportunity to train the employees to the company’s specific standards. The government can incentivize hiring less experienced people and giving them on-the-job training by giving tax breaks to companies that hire employees right out of college. This would cost the government very little, and be balanced out (hopefully) by a lower unemployment rate for recent graduates.

The government and some private institutions already have some projects in place that make education more affordable. The next step is to prioritize education to be more applicable to the real world. Getting young educated people into well-paying jobs and off of unemployment has never been more relevant, and taking steps to turn these suggestions into realities should start with people like me; high school and college students who will be facing these issues in the not-too-distant future. The harder we work now, the easier it will be when it’s time for us to enter the real world.

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Ilyssa Weingarden is a Roosevelt Institute summer intern and a rising junior studying International Affairs at George Washington University. 

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The Rebirth of Unions

Jul 2, 2012Hye Mi Ahn

Unions are a crucial aspect of the U.S. economy and should be adapted to be made more efficient rather than dismissed or eliminated. 

Unions are a crucial aspect of the U.S. economy and should be adapted to be made more efficient rather than dismissed or eliminated. 

In a letter to the president of the National Federation of Federal Employees in 1937, President Roosevelt wrote: "Organizations of government employees have a logical place in government affairs. The desire of government employees for fair and adequate pay, reasonable hours of work, safe and suitable working conditions, development of opportunities for advancement, facilities for fair and impartial consideration and review of grievances, and other objectives of a proper employee relations policy, is basically no different from that of employees in private industry." 

But the days of elected officials supporting organized labor may be behind us for good. Scott Walker, the Governor of Wisconsin who stripped government employees of collective bargaining rights, easily survived a recall election recently, inciting Republicans to declare that the backbone of the American labor union had been finally and truly broken. The discussion then turned to the implications for Democrats in the 2012 election, but the uncertain future for labor unions should not be dismissed so easily. 

Unions played a vital role in buoying the middle class throughout the 20th century, and they still remain a prominent fixture in countries around the world. During the 1950s—the height of unionization in the United States—membership rates hovered around 35p ercent and the public attitude toward unions was generally favorable. Progressives like President Roosevelt understood the importance of healthy unions to level the playing field between labor and management, and as a necessary check on the free market, so that employers would be beholden to their workers as well as shareholders and profits.

But in the following decades, several factors contributed to the steady decline of unions. As the United States began to move away from manufacturing, the middle class that supplied unskilled labor to the economy began to lose its collective power and political clout. Stonemasons, construction workers, and machine operators were laid off as the skills-focused service industry dominated the economy. Globalization led to the mass outsourcing of traditional middle class jobs. The relentless advent of technology required employees to have specific training or college degrees, when their positions weren’t replaced entirely by machines.

Unsurprisingly, income inequality grew larger as union membership rates fell during this time. And when union membership rates slow down, so do blue-collar wages. The middle class share of aggregate income has been in consistent decline since the 1960s, to an alarmingly low level today. 

In light of the Occupy Wall Street movement and the ongoing discussion of class warfare, it would be easy to presume that the "99%" would support labor unions that have been the historical equalizer between management and the working class. However, the fact that Scott Walker remains governor today is a sure sign that the existing model of unions, especially in the public sector, is unsustainable in an era of global economic turmoil. Eventually, budget deficits must be dealt with at every level of government, and austerity will spare few of the perks, like pensions and health benefits, that are associated with union membership.

But the election results should not be taken as the final word. Just as the motive for profit does not drive all employers to act ruthlessly, unions should not be assumed to exploit powers like collective bargaining to freeze out non-union members or hold employers hostage with strikes. Likewise, unions do not inherently cause inflation, unemployment, or state budget deficits, according to leading economists.

Here are some findings from a report by the Economic Policy Institute that show how unions benefit society as a whole:

  • “Unions raise wages of unionized workers by roughly 20% and raise compensation, including both wages and benefits, by about 28%.”
  • “Unions reduce wage inequality because they raise wages more for low and middle-wage workers than for higher-wage workers, more for blue-collar than for white-collar workers, and more for workers who do not have a college degree.”
  • “Strong unions set a pay standard that nonunion employers follow. For example, a high school graduate whose workplace is not unionized but whose industry is 25% unionized is paid 5% more than similar workers in less unionized industries.”
  • “Unionized workers receive better pension plans. Not only are they more likely to have a guaranteed benefit in retirement, their employers contribute 28% more toward pensions.”

There was a spurt of experimentation in the 1990s when companies and unions from AFL-CIO cooperated to form teamwork strategies that improved efficiency. Industry giants like Xerox Corp. found the initiatives to be so successful that they moved hundreds of jobs back to the United States and invested in their unionized workers for higher quality output and increased competitiveness. This is a norm in other industrialized nations; the history of modern European states shows a robust relationship, not fatal incompatibility, between organized labor and firms.

In the United States over the past few decades, unions have become saddled with an unsavory reputation of being ineffective, stubborn components of the economy that prioritize membership benefits at the expense of efficiency. The cozy, symbiotic financial relationship between public unions and elected Democrats hasn’t helped either. Instead of fanning the flames of the management-labor divide, as the unions tried to do with the recall effort in Wisconsin, unions should direct their energy to adapting and becoming cooperative elements in the free market by working with firms to generate productivity.

As the nation grapples with growing inequality, we should not categorically reject the place of unions in our economy. And as technology and changing business models reshape the global economy and feed the growing income gap as they have in the past, unions could prove to be critical at resuscitating the middle class now and protecting workers’ rights in the future. 

Hye Mi Ahn is a rising senior at Carleton College, and a Roosevelt Institute summer intern. 

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Why Obama’s New Immigration Policy is Good for the Economy

Jun 21, 2012Tim Price

Protecting undocumented workers doesn't mean they'll "steal" American jobs. Quite the opposite.

Protecting undocumented workers doesn't mean they'll "steal" American jobs. Quite the opposite.

Last Friday, the Obama administration announced that it would halt the deportation of young undocumented immigrants who would qualify for the DREAM Act and grant them work permits. The usual suspects leaped into action with shouts of “amnesty!” and charges that President Obama was once again selling out his country to serve his cosmopolitan principles. One reporter from the right-wing Daily Caller was so irate that he started heckling Obama during the statement announcing the new policy, asking whether it was “good for the American people.” But this move will in fact benefit Americans, and anyone concerned about America’s workers and the health of its economy should be pushing the administration and Congress to go even farther.

In the ongoing battle between the 1 percent and the 99 percent, undocumented immigrants undoubtedly fall into the latter category. According to Pew research, 62 percent of undocumented workers are employed in construction, hospitality, manufacturing, or wholesale and retail trade, and “in specific occupations like cooking, painting, washing cars, packaging by hand and installation of carpets and floors, they may make up 20 percent or more” of the total workforce. Although the same study finds that many of these workers make at least minimum wage, the Urban Institute reports, “About two-thirds of undocumented workers earn less than twice the minimum wage, compared with only one-third of all workers.” Moreover, research from the Dallas Fed notes that although they are covered by minimum wage laws, “undocumented workers paid less than the minimum wage are probably unlikely to seek legal redress for fear of revealing their undocumented status.”

In short, these workers perform lousy jobs for lousy pay, with little bargaining power, limited legal recourse if they’re mistreated by their employers, and no safety net to catch them if they get sick or lose their jobs. Dirt cheap, easily exploited, and readily disposable, they represent the model American worker for elites who rail against organized labor, social programs, and business regulations.

Bringing undocumented immigrants out of the shadows and acknowledging them as full and active participants in the workforce is essential, not just to improve their own economic standing but to increase economic justice for all workers. Conservatives often cast this as an us-versus-them conflict, warning that undocumented workers are out to “steal” our jobs and that granting them legal status will only create more competition for low-income Americans. But they're already here whether we choose to acknowledge them or not, and as Cristina Jimenez writes at The American Prospect (h/t Travis Waldron), “As long as a cheap, compliant pool of undocumented labor is available, employers have every reason to take advantage of the situation, keeping wages as low as possible.” No one’s out picking fruit under the hot California sun because of the great dental benefits; they’re doing what they need to get by, and their employers have them over a barrel. To put it another way, Terence O’Sullivan of the Laborers’ International Union of North America says, “Workers don’t depress wages. Unscrupulous employers do.”

The alternative to granting undocumented workers the legal protection they need to combat this exploitation is mass deportation, but rounding up and expelling 11 million people at a cost of $23,480 a head would be both inhumane and totally unaffordable. On the other hand, allowing them to stay and granting them legal status would actually help to reduce the deficit. According to a report from the National Council of La Raza, undocumented workers already contribute about $8.5 billion into Social Security and Medicare each year in addition to paying sales and property taxes. Far from being freeloaders, they pay $80,000 more in taxes per capita during their working lives than they take in from government services. But even if some of these workers were to achieve legal status through the DREAM Act and begin receiving the full benefits they deserve, the CBO and the Joint Committee on Taxation estimate that factors including their newly reportable income and decreased Homeland Security costs would generate $1.7 billion in new revenue and reduce the deficit by $2.2 billion over the next 10 years. The question of “Which do I loathe more, deficits or immigrants?” may represent a real Sophie’s Choice for some on the right, but it’s clear that deficit hawkery is incompatible with opposition to immigration reform.

Even if you’re not one of those people who wakes up in a cold sweat thinking about the debt-to-GDP ratio, there’s reason to believe the American economy has holes these undocumented immigrants could fill. (Not literally, though they do that too.) As President Obama has emphasized, the U.S. is falling behind other developed countries in college completion rates, which could soon lead to a shortfall in high-skilled workers. Luckily for us, among the undocumented immigrant population there are millions of young men and women who grew up in America, identify as American, and want to go to college and pursue their careers here. We just need to stop giving them reasons to be afraid to do so.

The DREAM Act, if it were ever passed, would give undocumented immigrants who arrived in the U.S. before age 16 a path to citizenship if they meet certain criteria, including the completion of a college degree or military service. It’s been introduced several times in Congress (originally by Republican Orrin Hatch) but blocked by the GOP on the grounds that it would grant amnesty to those who entered the country illegally – an idea so radical only a bleeding heart liberal like Ronald Reagan could support it. President Obama’s new plan doesn’t even go that far. It will allow some undocumented immigrants to work here legally, but it provides no clear path to citizenship or the rights and privileges that come with it. They won’t be able to vote, for instance, although taxation without representation has been something of a sore spot in American history.

As the president himself admitted in his Rose Garden address on Friday, this new policy is only “a temporary stopgap measure” until Congress can pass a comprehensive immigration reform plan. And while the politics of setting the age limit for the policy at 30 are clear, since the “crime” of immigrating here as children is harder to hold against them, it’s cold comfort for the millions of older undocumented workers who need and deserve some relief. But it’s still an important step forward, and not just on the moral grounds that, as the president stated, “We are a better nation than one that expels innocent young kids.”

Instead of blaming undocumented workers for taking American jobs (and casually referring to them as “illegal aliens,” which criminalizes their existence and makes them sound like something that’s going to abduct and probe us in the middle of the night), we should recognize them as victims of the same exploitative system that Occupy protesters have been grappling with since last fall. Is giving legal recognition to undocumented workers good for the American people? It’s a step toward acknowledging that there’s no such thing as a second-class citizen and that all working men and women deserve fair compensation. What could be more American than that?

Tim Price is Deputy Editor of Next New Deal.

Immigration services image via Shutterstock.com.



 

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Mike Konczal and Sarah Leonard on the Myth of American Meritocracy

Jun 11, 2012

On the latest episode of "Fireside Chats," Roosevelt Institute Fellow Mike Konczal brings in Sarah Leonard, editor at Dissent and The New Inquiry, to discuss the ways that student debt and unpaid internships have completely skewed the labor market.

On the latest episode of "Fireside Chats," Roosevelt Institute Fellow Mike Konczal brings in Sarah Leonard, editor at Dissent and The New Inquiry, to discuss the ways that student debt and unpaid internships have completely skewed the labor market. Mike used to think of internships as an equal opportunity mechanism, but then realized "you have to be able to feed yourself, you have to be able to survive," something that's hard to pull off when you're deep in debt and not making any money.

As Sarah bluntly puts it, "American meritocracy has always been a myth," but now these two forces have conspired even more to allow "people who make it to the top" to consolidate power there and "consolidate it for their children." Not only does a young person need money to take an unpaid position, but those who go into debt to get through college have an even harder time doing so if they need to work to pay off those loans. "Internships are absolutely a reinforcer of privilege," she concludes.

Mike compares student debt to the indenture system that brought Europeans to America's shores: it was set up "to solve an economic problem, a problem of travel," and now we have a similar problem in which we need to "get people who have significant talents to grow the economy to the spaces where they have their talents fully developed and they’re capable of exercising those talents." The biggest question? "How do we pay for it?" In other words, how do we make it affordable for everyone to have people get the education they need to best contribute to the economy?

Compounding this, Sarah notes that the language around student debt is about "investing in yourself," but in reality the need to take on massive amounts of debt to get an education isn't a way to open up opportunities at all. "It restricts your freedom after college," she says.

Watch the full segment below for their discussion of precarious work, the future of organized labor, and "Sex in the City" feminism:

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Mike Konczal on “Fireside Chats”: Tough Times make Liberal Reform Tougher

Jun 5, 2012Danielle Bella Ellison

In the latest episode of “Fireside Chats,” Roosevelt Institute Fellow Mike Konczal talks with David Frum, Daily Beast writer and author of the new novel Patriots. In the clip below, they take on why Democrats have had trouble gathering support for stimulus programs during the current recession. “We’ve gone from Speaker Pelosi and the new Obama presidency and the idea of this wave of progressive energy to really trying to fight between the center and the center right,” Konczal notes.

In the latest episode of “Fireside Chats,” Roosevelt Institute Fellow Mike Konczal talks with David Frum, Daily Beast writer and author of the new novel Patriots. In the clip below, they take on why Democrats have had trouble gathering support for stimulus programs during the current recession. “We’ve gone from Speaker Pelosi and the new Obama presidency and the idea of this wave of progressive energy to really trying to fight between the center and the center right,” Konczal notes.

As Konczal explains, “The real New Deal that we think of – the core economic security and managing the business cycle and so on – occurred in ’35,” when the economy was expanding. Meanwhile, “the conservative agenda to roll back the Great Society and the New Deal” unfortunately becomes more feasible in tough economic times like ours. The public becomes more risk averse and prefers austerity policies to big and potentially risky spending programs. Major liberal reforms, however necessary and beneficial they may be, are just very hard to pass during bad economic times.

The current grim economic condition, as well as the increase in media culture and accelerating ethnic change, have caused a transformation of American politics. Watch the full conversation below in which Konczal and Frum discuss this transition, what a Romney budget would look like, and the future of Obamacare.

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Why the Unemployed Are the "Forgotten Man" of 2012

May 31, 2012Tim Price

Instead of finding a solution to the jobs crisis, today’s politicians are making life harder for the unemployed.

Instead of finding a solution to the jobs crisis, today’s politicians are making life harder for the unemployed.

The “Forgotten Man” may be most commonly associated with Amity Shlaes’s book of the same name, an alternate history in which the New Deal made the Great Depression worse. But back in the spring of 1932, while campaigning against incumbent President Herbert Hoover, FDR invoked the phrase in a now-famous radio address. In it, he called for a policy response to the Great Depression that would “rest upon the forgotten, the unorganized but indispensable units of economic power,” policies that would “build from the bottom up and not from the top down, that put their faith once more in the forgotten man at the bottom of the economic pyramid.” The un-Shlaesed among us will recognize that the programs he launched once elected did exactly this, lifting up millions of Americans who had fallen to the bottom of the economic ladder – much to the chagrin of those still clinging jealously to the top rungs. But it seems there’s no such help coming to today’s forgotten men and women, the millions of unemployed Americans who our policymakers alternately overlook or actively punish for their misfortune.

It probably sounds strange to say that the unemployed have been forgotten when the state of the economy is the centerpiece of this year’s elections. But while politicians on both sides of the aisle talk a lot about the economy and jobs in the abstract, they’re easily distracted by minutiae and rarely seem to give much thought to the unemployed as living, breathing people. President Obama’s current economic plan seems to consist of reminding voters that Bain Capital once bankrupted a steel mill in Kansas, while Mitt Romney uses 8 percent unemployment as a cudgel against the incumbent but offers no solutions of his own besides something something tax cuts blah blah confidence.

Meanwhile, as Shaila Dewan reported in the New York Times this week, “Hundreds of thousands of out-of-work Americans are receiving their final unemployment checks sooner than they expected, even though Congress renewed extended benefits until the end of the year.” Over 5 million Americans fall into the category of long-term unemployed, meaning they have been out of work for over six months. Yet by next month, Dewan notes that over half a million of them will have prematurely lost their unemployment benefits this year thanks to cutbacks at the federal level.

At the same time, state governments are forcing new applicants to jump through more and more hoops to get out of paying them the benefits they deserve. Though 27 percent of all unemployed Americans received state benefits last year, Florida Governor and Observer-lookalike Rick Scott cut the number in his state to 15 percent last year by imposing particularly onerous requirements. The most extreme of these efforts was his attempt to subject unemployment applicants to a mandatory drug test, which was blocked (for now) by a federal judge. Florida may not give you your unemployment benefits, but by God, you’re going to give the Sunshine State your urine.

Given how many Americans are out of work, they would seem to form a natural constituency for politicians eager to win over swing voters. (That sounds cynical, but let’s assume for the sake of argument that altruism isn’t a major factor here. I know, it’s a stretch.) Yet instead of courting their support, policymakers are treating them like misbehaving puppies who need to be whacked over the nose with a newspaper. What gives? In part, this is due to conservatives’ knee-jerk opposition to government intervention and their belief that UI benefits can prolong high unemployment by discouraging recipients from seeking work. Studies have shown that UI benefits may be responsible for a fraction of a percentage point of our current unemployment rate, but Mike Konczal has a good rundown of why extending them provides a net economic benefit anyway. Aside from these policy differences, politicians in general just aren’t responsive to the needs and desires of anyone except for their richest constituents and Super PAC funders, who aren’t very concerned about whether some laid off factory worker in Ohio can feed his kids this week.

But there’s more to this conservative opposition than ideology or apathy. Cutting back on benefits is one thing, but why should they go out of their way to denigrate and humiliate the jobless? Mark Schmitt argues that Republicans found themselves adrift after they succeeded in passing welfare reform, since the “specter of the non-working poor could no longer be reliably evoked, and nothing with a similar power to divide voters has emerged to take its place.” But the economic crisis has proven to be a goldmine, providing them with a new underclass of jobless Americans whom they can portray as modern-day welfare queens. Look at these lazy slobs buying flat screens and diamond necklaces with their lavish unemployment benefits while the rest of us slave away at our hedge funds to make ends meet! “Much like arguments blaming the financial crisis on ACORN, Fannie Mae, and the push for low-income homeownership,” Mark notes, this approach “shifts the responsibility for unemployment onto the unemployed themselves.” For many politicians, this is the perfect one-two punch: it gets them the votes they need to win office, and once they’re in office, it takes away their responsibility to actually do anything about the biggest problem facing the country.

Back in 1932, FDR told voters that the Hoover administration had either “forgotten or it does not want to remember the infantry of our economic army.” Today’s Republicans, heirs to the Hoover legacy, would also like to obfuscate the crisis and make us forget the real circumstances of its victims. They know that if Americans see it clearly, they’ll also recognize that the only moral and practical response is one that provides more and better government aid rather than less. If progressive policymakers stop playing dead and start fighting back hard against these cuts to unemployment benefits, they may be surprised by how many troops they can rally to their side.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.

 

Empty pocket image via Shutterstock.

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ObamaCare Isn't Just About Health Care – It's a Winning Jobs Issue

May 31, 2012Richard Kirsch

Voters won't have to worry about losing their health insurance when they lose their jobs if Barack Obama is still president in 2014.

Massachusetts is the only state in the country where you don’t have to worry about losing your health insurance if you lose your job, and it will remain that way if Mitt Romney, the man who signed that Massachusetts bill into law, gets elected president. But if President Obama beats him, every state in the Union will join Massachusetts in 2014.

Voters won't have to worry about losing their health insurance when they lose their jobs if Barack Obama is still president in 2014.

Massachusetts is the only state in the country where you don’t have to worry about losing your health insurance if you lose your job, and it will remain that way if Mitt Romney, the man who signed that Massachusetts bill into law, gets elected president. But if President Obama beats him, every state in the Union will join Massachusetts in 2014.

The number one issue in the election, the issue that will decide who will be living at 1600 Pennsylvania Avenue next January 20th, is jobs. President Obama’s reelection prospects will be determined by how many of the small percentage of voters who are up for grabs decide that they might as well give Romney a chance, since their economic prospects are just as shaky now as when President Obama took office. It might help if they could see ObamaCare as a jobs issue, which it clearly is.

Many of the independent voters who will determine the presidential election are confused by the Affordable Care Act, as its passage has offered no relief for a major worry in their lives: if they lose their job, they’ll lose their health insurance. Or maybe they’ve already been forced to take a job without health insurance, or are self-employed or out of work. In that case, they may well be among the 51 million uninsured Americans who are worried that one major illness will wipe out whatever financial security they have left. Other swing voters might like to leave their jobs and start a small business, but they are locked into their current jobs until they reach 65 and qualify for Medicare. All that will change in 2014 if they vote for President Obama – which they might be more likely to do if they knew that.

Starting in 2014, health insurance will be affordable for the great majority of people who don’t get coverage at work. Most will qualify for heavily subsidized private health insurance through the new health insurance marketplaces (exchanges) that will be set up in each state. Many others in low-wage jobs will be eligible for coverage under Medicaid, which will be expanded to cover families up to 133 percent of the poverty level, around $30,600 for a family of four.

ObamaCare is more than a health care bill; it is a major step toward addressing the gaping inequities in our economy, where incomes and wealth for the richest 1 percent keep rising while most Americans are treading water or drowning. Three decades ago, a job came with good health care, along with rising wages and a pension. Now only 56 percent of the workforce gets health care on the job. With the implementation of the Affordable Care Act’s coverage expansions in 2014, almost all workers will have access to affordable health coverage, even if they don’t get the insurance at work.

President Obama and Mitt Romney are both working hard to appeal to the hard-pressed middle class. For Democrats, ObamaCare should be a core part of this appeal and the most powerful rebuttal to attacks on the legislation. The president and Democratic candidates for Congress around the county can reach swing voters on health care if they make the stakes in the election very clear: a vote for Romney and Republicans in Congress is a vote to leave Massachusetts as the only state in the nation in which you don’t have to worry that losing your job will mean losing your health care. A vote for Obama and Democrats will mean that, come 2014, Americans will finally have the security that – job or not – they will have health coverage for themselves and their families.

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

 

Medical bills image via Shutterstock.

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Defending Krugman: The Importance of Keynesian Economics

May 25, 2012Jeff Madrick

Keynes was right: increased government spending in the U.S. is necessary to decrease unemployment and raise demand in the near-term.

Paul Krugman hardly needs defending, but his views about the need for Keynesian stimulus in the U.S. right now are coming under considerable fire from centrist and left-of-center economists. I find this disturbing because Krugman’s view abides by basic Keynesian principles that seem to have been discarded by many who profess themselves Keynesians. Is there a wide misunderstanding of Keynes?

Keynes was right: increased government spending in the U.S. is necessary to decrease unemployment and raise demand in the near-term.

Paul Krugman hardly needs defending, but his views about the need for Keynesian stimulus in the U.S. right now are coming under considerable fire from centrist and left-of-center economists. I find this disturbing because Krugman’s view abides by basic Keynesian principles that seem to have been discarded by many who profess themselves Keynesians. Is there a wide misunderstanding of Keynes?

What seems to upset people is that Krugman argues the government must spend more money now, almost regardless of what it spends it on. The Keynesian thesis is that economies can settle at a high level of unemployment rather than re-adjust to the optimum unemployment level—or level of economic activity—on their own. This was a response to the classical, pre-Depression view that the beauty of free markets was a self-adjustment process based on falling prices in downturns. But ultimately the problem is a lack of demand, and Keynes advocated budget deficits to support an increase in demand.

The lack of demand in the economy now is palpable. Krugman’s contention is that in the near-term, we can solve this problem if we have the will to do so. The economy can reduce its rate of unemployment fairly rapidly with adequate Keynesian stimulus. It is clear that monetary stimulus at this point is not enough.

This view is not incompatible with longer-term concerns about the economy -- inadequate education for too many, infrastructure decay, old energy technologies, and so on. Many seem to criticize Krugman for not acknowledging “structural” changes in the economy, and they implicitly agree with classical conservative observers that the unemployment rate really can’t fall much below 7 percent. I can’t speak for Krugman, but he seems to be saying that we should not mix up longer-term structural issues with near-term demand inadequacy. It’s very likely the unemployment rate can fall much farther without igniting inflation.

I can’t see how he is wrong about this; indeed, he is urgently right about it. We are facing a year or two when the federal government will likely contract spending and will certainly not increase stimulus markedly. Of even greater concern is the refusal in Europe to recognize that austerity—the opposite of Keynesian advice right now—will lead to further recession, which in turn could spill over to the U.S., jeopardizing Obama’s candidacy.

When so many commentators criticize Krugman’s view, insisting that any new spending must be investment in infrastructure, must not go to the military, or that there should be no new spending at all, they are ignoring the Keynesian process. Krugman will not advocate against military spending cuts (and I certainly wouldn't myself). But priorities are important here. Let’s keep them clear.

In sum, let’s understand that more aggregate demand now will reduce the unemployment rate. There is a near-term solution, not to America’s long-term issues, but to an economy that is sputtering and may lead to a political environment in which those who plan to do more damage win office.  

One of the true advances in contemporary thinking is that both a power and a duty of government is to use fiscal and monetary policy to ameliorate downturns and create economic expansions. This is the legacy of Keynes, well supported by empirical research.  

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

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New Deal Numerology: An Equitable Arrangement

May 25, 2012Tim Price

 

This week's numbers: $607 billion; 20%; 115; $12 million; 13

$607 billion... is a transactional number. That was the aggregate value of private equity’s buyout deals at their 2007 peak. If you could sum up that period in two words, they'd be "job creation." And if you had three more words, they'd be "there was no."

 

This week's numbers: $607 billion; 20%; 115; $12 million; 13

$607 billion... is a transactional number. That was the aggregate value of private equity’s buyout deals at their 2007 peak. If you could sum up that period in two words, they'd be "job creation." And if you had three more words, they'd be "there was no."

20%... is an encouraging number. That's how much of the private equity firms' value was due to tax breaks on debt during their rise in the 1980s. If debt were like beer, our tax code would be the frat boy telling them to chug until they pass out.

115... is an acquired number. That’s how many companies Bain Capital bought out while Mitt Romney worked there. One of them was Staples, which would later base its “Easy Button” ad campaign on the real life stories of the millionaires who owned it.

$12 million... is a rewarding number. That’s how much Bain made from its buyout of GST, a steel mill that went bankrupt two years after Romney left. It must have been tough to decide whether to send his old partners condolences or congratulations.

13... is a resigned number. That’s how many years it’s been since Romney worked at Bain. It’s odd that he’d rather not focus on any of his experience since then, but his base likes firing people a lot more than giving them health care.

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