How Georgia Works Gives Employers Free Labor at the Expense of the Unemployed

Sep 12, 2011Mike Konczal

One of the key tenets of Obama's jobs plan rests on a program that is dubious at best.

In his jobs proposal, President Obama called for a modification of unemployment insurance based on Georgia Works, a proposal the administration refers to as the "most innovative reform to the unemployment insurance program in 40 years.” Georgia Works is a program wherein workers on unemployment insurance:

One of the key tenets of Obama's jobs plan rests on a program that is dubious at best.

In his jobs proposal, President Obama called for a modification of unemployment insurance based on Georgia Works, a proposal the administration refers to as the "most innovative reform to the unemployment insurance program in 40 years.” Georgia Works is a program wherein workers on unemployment insurance:

have the opportunity to train with a potential employer for a maximum of 24 hours per week for up to eight weeks. The Georgia Department of Labor (GDOL) provides a stipend and workers compensation coverage to participating job seekers. Employers pay nothing to these trainees. GW$ provides employers the opportunity to train and appraise candidates at no cost. There is no obligation to hire any given trainee...

Congressional conservatives such as Eric Cantor like the program, so there's a good chance it might pass. I actually missed the debate about this from a few weeks ago -- Zaid Jilani at Think Progress has a summary of some pros and cons from the time.

I'm fascinated by the terms under which people might justify this as a good program or would say it is a failed program. Its ideology works well for people who are concerned that our workforce lacks the training for 21st century jobs: it allows workers to brush up their skills at no wages so they'll be prepared to take on a job at the end. But even a quick glance at the underlying data shows that, instead of a program to jump-start education and training for skilled jobs, it looks like the Georgia Department of Labor is running a low-skills temp agency out of its UI fund for the benefit of employers.

Do the Numbers Fail?

How would you use the data to justify taking this program to a large, national scale? There are three hypotheses I can imagine being in play, and all of them turn out to have major problems.

The first hypothesis is that people who go through the program get hired for jobs. Now the comparison to be made isn't between getting hired and not getting hired; the comparison should be between those who do the program versus those who just keep on looking without using the program. Turns out that is problematic. As Jesse Rothstein told Arthur Delaney:

From its 2003 launch to the end of 2010, some 30,866 trainees entered the program, according to data provided to HuffPost by the Georgia Department of Labor. Of that total, 5,089 workers -- 16.4 percent -- were hired by the company that trained them during or at the end of the training period. (The department says that among workers who completed the full eight-week training, the employment rate is 24 percent.)...

Census Bureau data show that in 2007 and 2008, 15 percent of Georgians who'd been out of work for six months or longer found work within one month of a survey, according to Jesse Rothstein, an associate professor of economics and public policy at the University of California at Berkeley. In 2009 and 2010, the number fell to 10 percent.

So the transition from unemployment to employment looks to be very similar between those who do the program and those who don't, with the big difference being that those who do the program spend upwards of 24 hours a week working for free. Around 70% of Georgia Works participants are women. In so much as the workers in this program will have low skills and thus low resources (more on this in a second), it is likely much of their "leisure" time is spent on child care, uncompensated work in the household, or economizing household purchasing power -- there probably isn't much superfluous time to just give away to employers.

Hypothesis two, the most important one, is that these jobs require unique skills and the potential workforce doesn't have the right ones. Thus a special training period is necessary. What kind of jobs would these be? They would require more education than normal low-skill jobs. They would be jobs that are difficult to be productive in right away. They would involve new technologies, especially in manufacturing, that go beyond the normal workforce. They would cluster in the "some college" category at least.

Eileen Appelbaum of CEPR looked into the jobs data and concluded that for those who

found employment between November 24, 2009 and September 30, 2010 shows two-fifths found jobs doing general clerical work. Hundreds more found jobs as non-professional child care workers, janitors, retail sales persons, restaurant and fast food workers, hotel clerks and maids, or drivers and chauffeurs. In total, 70 percent of the trainees hired after the end of the training program found employment in these or similar low-wage jobs.

I was able to get the same data on successful job hires through the Georgia Works program for the period from November 2009 to October 2010. The total number of successful hires was 7,997, and they are divided up by NCCI code for categories. Here's a chart showing some of the major jobs types that stood out. Sixty percent of Georgia Works hires belong to four broad job categories:

What does this tell us? All of these jobs, according to the Bureau of Labor Statistics' (BLS) Occupational Outlook Handbook (OOH), require a high school diploma or less. They are all jobs that are "de-skilled": the types of jobs someone can go into and out of and be relatively productive at day one. Many of them are high churn, high turnover jobs. Indeed, they seem more characteristic of a temp agency than an institution that is focused on jobs that require skills to accelerate productivity.

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Next I took the top 30 classifications in the data and cross-indexed them based on my reading to education requirements and hourly wage as found in the OOH. The top thirty job classifications represent 80% of the hires of Georgia Works, so it is a representative sample. As you can see, I had trouble finding jobs in the top 40 occupations that required even an associate's degree, much less a college degree. This is the percentage of jobs by education level:



Among the top 30 jobs in Georgia Works, it is more likely that a given job will require less than a high school diploma, or no formal education, than it would require an associate's degree. They are more likely to be jobs like janitors, restaurant servers, and maids than those that require new skills and specific training unique to the new century. Even the high school level includes a lot of jobs -- clerical work, storage warehouses, drivers, retail -- that allude more to temp agencies than high-tech.

third hypothesis is that workers will make more money if they are hired through this program than through normal job searches. In this hypothesis, giving labor away is a sign of being a non-shirking worker and employers will largely compensate back the lost hours in the post-hire salary.

That's a simple empirical question I don't have the data for. But I did notice this slide in this October 2010 presentation on Georgia Works, A Perspective Toward Job Growth and Training Initiatives in a Recovering Economy:

If, after examining the data closely, you can go around telling employers that they are saving over $20 million dollars -- savings that must come from not paying salaries -- it's hard for me to think that it ultimately nets out back to workers.

A Failure in Ideology?

Here's a cool thing about neoliberal policy: you can justify any kind of terrible proposal by invoking the idea of a market and throwing more weight on the back of that already overburdened word "choice."

So I could say, "This certainly looks like a way to run a low-skill temp agency giving weeks of free labor to employers, employers who already probably have monopsony power and labor that is effectively deskilled, with taxpayers picking up the tab." A neoliberal would then respond, "Well this program gives people the market dynamism of the choice to be choosing in the market of choice for the market of uncompensated labor, a choice market that synergizes with employer's full choice of market wages," and in our age that would somehow constitute a strong retort. Repeat that enough and the policy fellowships will just start falling into your lap.

But we have to step back and think: What kind of labor contract do we want the government creating, encouraging, and setting boundaries on? I've been discussing how our laws, courts, and institutions create the free-floating notion of a "free" labor contract. For all the talk about "choice," this program nudges people into working for free in what are likely already difficult, exploitative markets. What are already high-churn industries will now have wages depressed even further from taxpayers subsidizing unpaid labor. And the ideas that derive from it -- that the problem with our economy is that workers are lazy and stupid rather than that the fact that there are no  jobs, that employers should get more claims on work for free and that the spirit of indenture should be strengthened in the workplace -- are the ideas that liberals have to fight against in these dark times.

Mike Konczal is a Research Fellow at the Roosevelt Institute.

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How September 11 Called the Millennial Generation Into Action

Sep 9, 2011Reese Neader

The youngest generation is already working hard to transform the country in honor of those who lost their lives.

On September 11, 2001, I stood up and walked out of class. I was studying international relations at Heidelberg College in Tiffin, Ohio and my class had been invited by our professor to discuss what just took place. What had happened and why? But more importantly, what did September 11 represent?

The youngest generation is already working hard to transform the country in honor of those who lost their lives.

On September 11, 2001, I stood up and walked out of class. I was studying international relations at Heidelberg College in Tiffin, Ohio and my class had been invited by our professor to discuss what just took place. What had happened and why? But more importantly, what did September 11 represent?

September 11 did not change our lives in the way the terrorists wanted. We are still the strongest country in the world and we are still the leaders of a global system that represents the American experiment in higher ideals of democracy, liberty, and shared prosperity.

Instead of destroying our country, September 11 roused a generation. The children who witnessed the fall of the towers have grown up through the Longest War, the Iraq War, two contested national elections, the housing crisis, the battle over climate change, a credit and student debt explosion, Hurricane Katrina, the worst environmental disaster in U.S. history, and the Great Recession.

Our country is witnessing the long, slow breakdown of our systems. We are faced with an era marked by crises in energy, the economy, and national defense. As the world continues to look to America for global leadership, we find ourselves facing a crisis in leadership. Our government is paralyzed, our financial sector is rotten with corruption, and our corporate economy is choking under its own weight. Overseas, our soldiers continue to bravely fight the Longest War but are fighting with one hand tied behind their backs, facing 21st century enemies with 20th century weapons and rules.

But this is not the first time that America has faced down an existential challenge. We fought for our independence against the British Empire. We rooted out the disease of slavery. We built our way back from the Great Depression and defeated the Nazis. Our parents and grandparents marched together for Civil Rights. We have traveled to the moon and we ended the Cold War. Every one of these events was born from a generational struggle. On September 11, 2001, as Millennials saw our way of life being attacked, we dedicated ourselves to achieving the promise of America and building a country where everyone can speak with freedom, worship with freedom, achieve prosperity, and live in peace and security. Our generation will also meet the challenges of our time and we will do it by following in the our country's tradition of exploration and innovation. America has changed the world with its inventions and ideas, and we're not done yet.

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The Millennial Generation is rising to meet the challenges of our time.

We are designing the next generation of energy infrastructure in labs and offices across the country, developing cleaner fuels, smarter technologies, and new forms of transportation that will create jobs for millions of Americans and propel our country into a new era of prosperity.

In cities across the country, Millennials are designing job creation policies and financial services that invest in American workers and replenish local economies. Social entrepreneurs, green businesses, and technology specialists are building a new economy that will generate wealth for Wall Street and Main Street, while making it a priority that our profits are generated from social enterprise, energy savings, and conserving the environment, creating millions of American jobs for American workers in the process.

And always vigilant, our military is responding to national security threats by designing new fighting systems and making smart investments in renewable energy research and development.

America began a new chapter on September 11, 2001. Rest assured that our generation is fighting for our future by actively rebuilding our country from the inside out. We are changing the way we live, the ways that we make money, and the way we value money. The lack of security engendered by 9/11 has provided our generation with a strong resolve to overcome challenges.

In our time we will, as a country and as a world, hang together or hang separately. America needs leadership imbued with values and a long-term vision for the progress of our country. The Millennial Generation is busy at work while waiting for its turn to take control of the country. We will succeed in our mission to rebuild the United States and ignite a new era of national prosperity, and we will do it inspired by the men and women who lost their lives on September 11, 2001. In the words of President Obama, in his inaugural speech in 2009, "We say to you now that our spirit is stronger and cannot be broken; you cannot outlast us, and we will defeat you."

Reese Neader is the Roosevelt Institute | Campus Network’s Policy Director.

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Did Obama Address the Womancession Last Night?

Sep 9, 2011Bryce Covert

The plan isn't perfect, but women's poor employment outlook seems to be on Obama's radar.

There were a lot of rumors about what would be included in President Obama's speech to a joint session of Congress yesterday. Would it be mostly tax cuts? Would it extend unemployment benefits? How much will be spent on infrastructure projects?

The plan isn't perfect, but women's poor employment outlook seems to be on Obama's radar.

There were a lot of rumors about what would be included in President Obama's speech to a joint session of Congress yesterday. Would it be mostly tax cuts? Would it extend unemployment benefits? How much will be spent on infrastructure projects?

The last point had me slightly worried. Not because we don't have a huge need to spend vast amounts of money updating our dilapidated infrastructure. Not because we shouldn't be putting construction workers, architects, engineers, and factory workers back to work making it happen.

I was worried because those kinds of jobs are overwhelmingly held by men. And while the "mancession" meme had truth to it when the recession began -- men's unemployment rate was at 11 percent in August of 2009, while women's was 8.3 percent -- and men are still experiencing an unemployment rate of 8.9 percent, women have not been immune to the trend. And now they are sliding backward. Since the recession technically ended, women have lost 281,000 jobs, while men have gained 805,000. The percentage of women who have a job hasn't been this low since 1988.

A large chunk of their job loss has occurred in the public sector. Women lost 343,000 public-sector jobs between June 2009 and June 2011, accounting for 70 percent of the cuts. As Susan Feiner explains, women have been concentrated in this sector because many of the jobs don't challenge gender ideology (care giving roles and direct services are still seen as "feminine" work) and the schedules are often flexible, facilitating the care work that usually falls to them. So the cuts have fallen heavily on women, particularly teachers. As state budgets have been hit by shrinking tax revenues and increased spending on unemployment benefits and other safety net programs, they've slashed payrolls, often in education. About 290,000 school personnel have lost their jobs nationally since September 2008. And women make up about 78% of our pre-K to 12 teachers.

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Obama's jobs plan surprised me by taking direct aim at this phenomenon. It includes $30 billion to prevent up to 280,000 teacher layoffs. It will also help preserve or extend school days and the school year, as well as give support to after-school programs. This is really, really important. Women's unemployment won't be directly addressed by infrastructure spending, but anything to bolster schools will make a difference. It also helps us remain competitive as a country with a well-educated workforce.

But it doesn't give any relief to out of work teachers the way infrastructure spending is expected to put unemployed construction workers back on the job. And women aren't just losing teaching jobs in the public sector. They're losing jobs in the private sector as well, while men are making some small gains, with their layoffs often occurring in secretarial and administrative support roles. There are also other places women's jobs can be boosted, for example by investing in eldercare and childcare and raising the standard of living in poorly paid, low benefit service work. Meanwhile, we as a country need to work on dismantling the gender segregation in our workforce, including helping women into the construction industry and other male-heavy areas that pay well and usually come with good benefits. None of these are issues we can ignore.

But I'm happy to see that women are on Obama's radar, and it is extremely important that we save teachers' jobs. The package isn't perfect from any way you look at it, but it does hold signs that he is at least paying attention to many of the crises we face.

Bryce Covert is Assistant Editor at New Deal 2.0.

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Obama's Jobs Speech: Is He Finally Coming to Grips With the Recession?

Sep 8, 2011Mike Konczal

Obama's ideas matter, and they may now be moving in the right direction.

Obama's ideas matter, and they may now be moving in the right direction.

Over the weekend, Jonathan Chait wrote an article critical of "the Left's" critique of Obama's economic policy. He criticized the "magical thinking" shown by people who assume the president is more powerful than he is and can push things through Congress, as well as people like Drew Westen who argues that Obama needs to be a better rhetorician when it comes to talking about unemployment and the government. It's worth reading because it's likely to be a conversation that will be with us for some time.

One major problem with Chait's critique is that there is an excellent case to be made that the Obama administration has had the wrong ideas about both the nature of the unemployment crisis and what the government's response should be since the get go. Drew Westen has a specific theory about presidential rhetoric; if we expand Westen's definition to include ideas, beliefs, and assumptions about the economy, then there is a stronger case to be made against the administration.

To start at the beginning, it looked like the administration thought this would be a shallower recession than it was. The stimulus was thought of as an insurance mechanism against the worst case scenario, rather than something to bring the economy back up to full employment. There was an emphasis on restoring confidence in the financial sector immediately rather than working out the housing market issue, with the administration even proposing some strong steps to find funding that sidestepped Congress (like PPIP). This is consistent with the idea that the financial sector would lead us out of the recession, rather than just sit on a record level of reserves.

Given that we had a housing bubble, it would have been essential to formulate some process to deal with the losses from the housing crash. Housing is a key part of the business cycle, a major channel for monetary policy, and the bank servicing model created during the bubble is currently set up in a way that is designed to exacerbate fraud and corruption. But HAMP and other programs meant to deal with the housing and foreclosure crises failed even their modest goals and didn't even spend the money they had. And how could they have worked well? They were designed to float the housing problems out a bit and manage the rate of foreclosures while Wall Street and the economy, in a shallow recession, bounced back. Liberals like Elizabeth Warren and Damon Silvers pointed out that these programs were too little and too late at the time, though they were ignored.

The rush to austerity and the appeasement of the confidence fairy hit early. By December 2009, Treasury officials were telling Chait's colleague Noam Schieber at the New Republic that they needed "some signal to U.S. bondholders that it takes the deficit seriously" and "spending more money now [on stimulus] could actually raise long-term rates, thereby offsetting its stimulative effect." A senior administration official told Chait that the "reality is that it’s not too hard to find a Wall Street analyst that says a second stimulus basically cancels itself out almost immediately because of the impact at this stage on government financing costs." In case you didn't notice, we've just hit some of the lowest 10-year rates on government bonds in history, at least until I look again in a month.

Brad Delong, like many liberals, flagged that piece as a reason he was becoming increasingly bewildered by the administration's thinking (Scheiber responded). But if you are worried first and foremost about bond vigilantes, it makes sense. That's just the wrong thing to be worried about.

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The administration was overly optimistic throughout 2010. By 2011, they put most of their rhetoric in full-on confidence mode. Obama is wonky and it is often easy to trace the origins of his ideas, and he went around promoting the most nihilistic interpretation of Rogoff/Reinhart's book (rightfully flagged as the most dangerous set of ideas in the world by Joe Weisenthal). Obama gestured towards structural unemployment arguments and a skills gap, Gene Sperling was all about restoring confidence as an end-goal, and of course stimulus is sugar. The centerpiece of the 2011 State of the Union was a Win the Future that focused on long-term growth rather than getting back to the short-term trend. Liberals countered by arguing unemployment is a major problem that can be impacted by both fiscal and monetary policy.

For many who liked Westen's piece, they were probably reacting more to a reading that says Obama needs to get serious about liberal ideas more than one that gives a theory of how politics works. For these were all choices about how to view the world, choices to accept one set of ideas over another set of ideas. And they were all ideas that focused on a neoliberal model of financial sector confidence, rather than the liberal Roosevelt program of reworking mortgages and implementing aggressive monetary and fiscal policy. Even with a reactionary opposition and a deadlocked Senate, ideas matter.

Tonight's speech was a chance to reboot these ideas. How did it go?

Let's go through some specifics:

- It eliminates the payroll tax for workers in a way tilted towards small businesses and cuts it in half on the employer side. The employer side tax cuts are a bad way to go about it, but if they pass they can do some good. There should be additional worry that it will be difficult to raise this at a later date, putting pressure on the way we fund Social Security. The emphasis on tax cuts, which make up the majority of the bill, is consistent with moderate GOP stimulus package plans of the kind we saw in the Bush tax cut extensions.

-  Jared Bernstein should be happy -- there's $25 billion targeted at school infrastructure rebuilding.

- It punts on housing. It looks like a refinancing plan, which is good. It targets the worst hit areas, its effects will feel like a permanent tax decrease, and consumers are well incentivized to do it quickly. But it's not a sufficient idea, it will be carried out through HARP rather than a new initiative, and it isn't clear how the FHFA will deal with it.

-  $75 billion in infrastructure spending, including an infrastructure bank.

- "The most innovative reform to the unemployment insurance program in 40 years." I'll cover this in detail in the future, but work-sharing looks interesting while the "bridge to work" is potentially troublesome.

- "A $4,000 tax credit to employers for hiring long-term unemployed workers... Prohibiting employers from discriminating against unemployed workers when hiring." I think this is great on the first read. Tackling long-term unemployment is an important item, and this is likely to have a significant effect in getting the long-term unemployed back to work.

What does this signal on the ideas front? We'll see where the deficits speech goes in the next week, but it certainly looks to be a move against the austerity/confidence games that the administration lost 18 months playing and toward the government moving on creating jobs. There's a need to give an extra lifeline to a weak economy and it's the government's job to do it. The fundamentals -- low inflation, low wage growth, high unemployment, low job vacancies, record-low borrowing costs -- all demand this plus even more. Obama also identified the enemy: those that would opportunistically use this moment to dismantle the parts of government they don't like and shift power and wealth to the top. Significantly more than I asked for in a speech; let's see where it goes now.

Mike Konczal is a Research Fellow at the Roosevelt Institute.

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Some Advice for Obama on His Jobs Speech Tonight

Sep 8, 2011

President Obama is set to give a much-anticipated speech on how he plans to combat our unemployment crisis and jumpstart the economy. What policies should he lay out? Can one speech make any difference? We at the Roosevelt Institute weigh in.

President Obama is set to give a much-anticipated speech on how he plans to combat our unemployment crisis and jumpstart the economy. What policies should he lay out? Can one speech make any difference? We at the Roosevelt Institute weigh in.

We all know that Barack Obama is no Franklin Roosevelt. The question now is whether he's Herbert Hoover. The U.S. economy is dead in the water. Three years into his term, unemployment is frozen at over nine percent. In a scenario reminiscent of the Night of the Living Dead, his administration's bungling and temporizing has revived all the old pre-2008, free market fundamentalist stereotypes about the impossibility of effective government action. An infrastructure bank and a few minor tax cuts would be nice, but this is a moment that calls for massive government action based on the model of the New Deal: A contemporary equivalent of the WPA, mortgage relief along the lines of the Home Owners' Loan Corporation, aid to the states, and real efforts to make banks use their money to make loans of instead of buying back their stock and paying bonuses. With Europe going into recession and on the brink of another giant financial crisis that may well produce a "Lehman in reverse," there is not a moment to be lost. And if Republicans obstruct, then it's time to campaign against them instead of agreeing in advance to all their principal demands. - Roosevelt Institute Senior Fellow & University of Massachusetts, Boston Professor Tom Ferguson

As a Millennial and someone who has recently graduated from college, I believe it is critical for President Obama to address how young people can graduate and find a job. It is now a certain fear for college seniors and recent graduates that they won't be able obtain a job that uses the degree they've just earned and allows them to begin paying back sky-rocketing students loans without a steady income. Similarly to the rest of the country, many of my friends who are recent graduates are struggling to find a job, being a year out of school, and are working at establishments where a college degree is not required in order to start paying back their student loans. We need to hear President Obama speak about a plan to ensure that young people coming out of college can enter the workforce, earn a steady income from their intended career, and pay back their college debt. - Roosevelt Institute | Campus Network Chapter Services Coordinator Dante Barry

The policy framework of the U.S. government has been clear and unchanged since the passage of TARP. This speech, like every other set of administration policy proposals, will be irrelevant. Citizens should not pay attention to it. To the extent that there is an idea that could help Americans, it would be the restoration of the rule of law in the financial sector combined with mass principal write-downs for home mortgages. - Roosevelt Institute Fellow Matt Stoller

It's time for an America that works for all of us -- starting with good jobs for everyone. Jobs with good pay and benefits so that families can educate their children, live and retire with security, and pursue their dreams.

We built a strong America by building a strong middle class. But today the rich are richer than ever while the middle class is being crushed and totally closed off. CEO campaign contributors buy tax breaks from Congress to ship our jobs overseas, while their corporations cut our wages and benefits at home.

We can create good jobs for everyone in America. There is more than enough vital work to be done and Americans stand ready and eager to do it. We can create:

  • Good Jobs. We can assure that every job -- private and public -- pays enough to support a family with decent wages, health and retirement benefits, and family-friendly leave policies.
  • Jobs for Everyone. We can create tens of millions of jobs for our future. Jobs for a green economy of energy independence, jobs to rebuild our infrastructure and create a new infrastructure for the information age. Jobs to educate our children and take care of our seniors.
  • Good Jobs in America. We can create good jobs in America with fair trade and currency policies, government purchasing American-made goods, and the end to tax breaks for companies that ship jobs overseas.

The question before Congress today, the question that every American is asking us, is not whether Americans want to work or whether there's plenty of work to be done. It is whether Congress can stand up to the lobbyists for the most wealthy and powerful and put the lives and livelihoods of everyday Americans first. - Roosevelt Institute Senior Fellow Richard Kirsch

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Obama's Speech as a Thermometer for Our Sick Democracy

Sep 7, 2011Robert Johnson

Can our society reward politicians for doing the right thing to stop a crisis?

Can our society reward politicians for doing the right thing to stop a crisis?

President Obama's speech on Thursday comes at a very difficult time. He pivoted toward deficit reduction in 2010 and alienated his base with validating "fist bumps" for Eric Cantor and golf outings with John Boehner while the latter pair were doing their debt ceiling game of chicken. Now he is either 1) expected to restore his base's enthusiasm with a vigorous vision of economic recovery or 2) pander to the Chamber of Commerce with supply side gimmicks that will have little impact on employment but create mini windfalls for donors. Romantics and cynics are equally inclined to project onto the event.

As observers, I sense we would be better to watch this speech and ask the question, "What can we infer about the structural deformations of our democracy when a smart man like Obama is saying [whatever he says] when heading toward an election campaign?"

We are in effect taking the temperature on the sickness of our democracy. We have two currencies of power in America: votes and dollars. The episode of TARP, a month before the 2008 presidential election, gave us evidence that dollars are the more powerful currency even at election time. We will learn where Obama thinks the balance lies from this speech.

When demand is stagnant and 16 percent of the population does not have full-time work, we are in an obvious and profound crisis. The vigor with which both parties embrace deficit reduction contrasts violently with the helpless timidity with which they address the challenge of jobs.

The fact is, we do not have a society that is stable and functional when our politics is insensitive to a crisis of this magnitude. As Jared Bernstein said last week on his blog:

...Have we, as a nation, lost the ability to self-correct?

Any system, whether it's biological, political, or economic, must be able to diagnose and fix its problems if it is to survive. I don't mean to be gloomy or dramatic, but I'm wondering if our political/economic system is up to that task.

Are we up to the challenge as a society? The question is not whether Obama is up to the task but whether our society, as it is structured in a post-Citizens United world, is capable of responding to the needs of large segments of our population. Can Obama pursue healthy policies and believe he can be re-elected for doing so? If not, we have real work to do in reforming our politics. I suspect that it is the case or we would already see the White House and Congress on a constructive path toward demanding stimulus and employment relief.

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So what do I want to hear from Obama?

1. Corporate profits are at their highest level since the Korean War. Corporations need no more incentives to hire. Just more confidence in demand growth.

2. All this long-term deficit reduction we are planning to do is to buy space for a profound short-term stimulus over the next three years or so, until the unemployment rate is below six percent.

3. Stimulus should be focused on projects that will have lasting productivity benefits for the nation for years to come. Education investment, science spending, and infrastructure modernization all help.

4. We have to look seriously at how we subsidize foreign direct investment and change the tax code to support domestic investment. Subsidies for outsourcing and offshoring have to be terminated.

5. Single payer health insurance and negotiated drug prices are not only the essence of good budget policy in the long term, they are good policies for jobs and competitiveness because no other society has such ridiculously high prices, and employer-based health costs deter hiring.

6. Public financing of elections, and requiring our networks to donate public service time for elections, would be the best way to reduce pork and realign our incentives and would be great for budget policy and social balance in the long term.

If several of those six themes are addressed, I will be encouraged. If I see Obama make a stand and work diligently to make them into policy and openly take issue with officials in either party for opposing them, I will be inspired. It has been a long time since I have been inspired by the actions of the President of the United States.

Rob Johnson is a Senior Fellow and the Director of the Project on Global Finance at the Roosevelt Institute.

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President Obama's Jobs Speech is His Last Real Chance

Sep 6, 2011Bo Cutter

If Obama doesn't go big in his jobs plan on Thursday, any proposals will disappear into the ether along with his chances for re-election.

President Obama has a big task ahead of him on Thursday. He has to be honest. He has to go long. He has to break some china. And he has to not care. Why? It's what the country needs. And he is a one-term president if he doesn't change the game.

Let's start with being honest. He must explain to the country where we are and where we will be if we do not act. Then he has to explain what we must do and why it seems contradictory.

If Obama doesn't go big in his jobs plan on Thursday, any proposals will disappear into the ether along with his chances for re-election.

President Obama has a big task ahead of him on Thursday. He has to be honest. He has to go long. He has to break some china. And he has to not care. Why? It's what the country needs. And he is a one-term president if he doesn't change the game.

Let's start with being honest. He must explain to the country where we are and where we will be if we do not act. Then he has to explain what we must do and why it seems contradictory.

What does all this mean?

This recession was different and this anemic "recovery" is different than our whole post-World War II experience. We will have high unemployment for years. (To bring unemployment down to five percent in five years, we would have to have monthly job growth higher than the 1993-2000 boom years.) This means a continuing squeeze on incomes and longer, higher long-term unemployment than we have seen for decades.

At the same time, our low rate of investment (both public and private), the state of our infrastructure, our eroding educational system, and the kinds of jobs we are creating combine to make achieving higher economic growth more difficult and virtually guarantee a continuing rise in inequality.

We really do have a deep debt and deficit problem. We do not have to solve it in the next year, but if we do not quickly get on the right path, markets will take the decision out of our hands.

There is a lot we can do to make this emerging situation better, but there is nothing we can do that will work quickly. And there is no indication of any kind that the political system is capable of producing the right mix of policies -- quite the opposite.

President Obama must say all of this. The nation has to have a context to understand why we are where we are and what we must do. Then he has to go long. If this is a speech about green jobs, the return of manufacturing, and the payroll tax, TV remote controls all over the nation will start switching channels, and the president and Congress will be talking to themselves.

The president should announce on Thursday night what I called a few weeks ago "The Project for American Renewal." Specifically, the president should demand the following:

(1) A short term stimulus of two to four percent of GDP to keep growth from cratering over the next year or so. The stimulus would be composed of a continued payroll tax holiday, including one for employers, and a jobs tax credit. I want something that spends fast and is not wrapped up in some fancy new program no one understands. And to be clear, this stimulus will not fundamentally alter our unemployment problem.

(2) Adoption now of the Simpson, Bowles, Rivlin, Dominici debt and deficit plan. (There isn't one unified plan, but there could be within a couple of weeks if the president asked.)

(3) A long-term infrastructure program amounting to about one to two percent of GDP per year for 10 years, with the money to be spent through a combination of an Infrastructure Bank and fund.

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I would prefer that the president announce the Project for American Renewal on Thursday, with an emphasis on short-term stimulus, and follow up with separate speeches on the debt and deficit and on infrastructure.

If he does all of this, the president will break a lot of china. He will be proposing a seemingly contradictory plan for short-term stimulus and longer-term debt reduction, changes in Social Security and Medicare, major income tax reform and lower rates, a new source of revenue that looks a lot like a Value Added Tax, 10 years of infrastructure spending, and a mechanism to avoid the Appropriations committees -- the heart of the feeding troughs today.

There is something big in this Project for everyone to hate. There is not the slightest chance it will pass before the election. No political adviser in this White House will be for it. The president cannot care.

In particular, the president cannot care about what his congressional Republican critics say or do. The level of hypocrisy they've attained cannot really rise any farther. But what the president can bank on is that their behavior is now widely recognized and understood. I was amazed to see the following comment by Martin Wolf of the Financial Times, perhaps the leading economic columnist in the world, and not close to a bomb thrower: "Mr. Obama wishes to be president of a country that doesn't exist. In his fantasy U.S. politicians bury differences in bipartisan harmony. In fact, he faces an opposition that would prefer their country to fail than their president to succeed."

Meanwhile, a Washington Post-ABC News poll published today says that:

• 20% of Americans believe the country is on the right track

• 17% of Americans think the president's economic policies are making the economy better

• 53% of Americans disapprove of the president's overall performance

• 62% of Americans disapprove of his handling of the economy

I have no idea if a big program, put forward with energy and defended consistently, can make a dent in these numbers. It is possible that by failing to put forward a clear economic story for two and a half years, the administration has dug too deep a hole for itself.

But these numbers are saying clearly that the president has to state a big, new course. A small, precious little program will disappear without a trace.

The polling numbers also say something else. While 53 percent of Americans disapprove of the president's performance, 68 percent disapprove of the Republicans in Congress. The president and the Republicans in Congress are in the same position as the two hikers and the bear. Bear charges. Hiker # 1 sits down to put on track shoes. Hiker # 2 says, "You're crazy, you can't outrun that bear." Hiker # 1 says, "No. But I can damn sure outrun you."

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

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We Won't See Mass Prosperity Until We Rebuild Manufacturing

Sep 6, 2011Jon Rynn

workers-200No matter how large a jobs effort the government puts forward, revitalizing the manufacturing sector holds the key to long-term success.

workers-200No matter how large a jobs effort the government puts forward, revitalizing the manufacturing sector holds the key to long-term success.

While there are many similarities between our time and the Great Depression, there is a crucial difference: In the late 1930s, the United States produced over one-third of the world's manufactured goods, while in 2008, the American manufacturing share was down to 18 percent after being trashed by outsourcing and imports. By increasing demand for products through government action, FDR was able to set the country up for the "Great Prosperity" from the end of WWII until the 1970s. Now, even with a large second stimulus, we will not be able to experience a new era of prosperity until we rebuild the manufacturing sector.

Recently, a crop of articles has appeared that argue that "our economy will thrive only when we make what we invent," as Susan Hockstein, President of the Massachussetts Institute of Technology, recently concluded in a New York Times op-ed. Hockstein is challenging the idea that the United States can somehow be a world-class source of innovation without actually producing the new products. As she points out, in the past, "with design and fabrication side by side, insights from the factory floor flowed back to the drawing board." She echoes the research of Professors Pisano and Shih, from an article in the Harvard Business Review, in which they wrote, "The U.S. has lost or is in the process of losing the knowledge, skilled people and supplier infrastructure needed to manufacture many of the cutting-edge products it invented." When engineers could go down to the factory floor and look at the results of their design decisions, it was much easier to create yet more innovations. A major criticism of a corporation (such as GM) used to be that the design engineers would take their designs and "throw them over the wall" to the factory floor without worrying about how the designs fared in a factory setting. Now we throw the designs over the Pacific Ocean to China.

By contrast, as John Gertner writes in the New York Times Magazine, "As the former White House economic adviser Lawrence Summers put it, America's role is to feed a global economy that's increasingly based on knowledge and services rather than on making stuff." The benefits of separating production and innovation have been accepted as conventional wisdom for the past few decades, exemplified by Summers's statement.

But reintegrating innovation -- that is, science and engineering -- with production -- skilled production workers and operations managers -- is necessary. Back in the Great Depression, the Russians bought American factories and imported American engineers to create their industrial system. (Germany also helped, much to their later regret.) Now, after decades of closing down factories, throwing engineers and skilled production workers out of work, re-orienting those professions to military work and much of the educated class to finance, the U.S. is in the position of a developing country. We must try to catch up to Europe and Asia in any way that we can.

It won't be easy. On the one hand, Hockstein points out that "to make our economy grow, sell more goods to the world and replenish the work force, we need to restore manufacturing -- not the assembly-line jobs of the past, but the high-tech advanced manufacturing of the future." On the other hand, Gertner reports that advanced electric car battery makers are forced to buy Korean companies and import Korean engineers in order to get up to speed with cutting-edge technology. A battery maker tells him, "That's where the know-how was -- it was nonexistent in the U.S."

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While the increasing recognition of the importance of manufacturing is encouraging, we are still witnessing the very beginning of the effort to tackle solutions. Hockstein calls for more research dollars from the Federal government and support for more graduates and skilled workers in advanced manufacturing fields. While these are a good start, they won't solve the underlying problem. What we need is an industrial policy, a coordinated set of initiatives that the government pursues to make up for the many market failures we are currently experiencing. But as Gertner points out, "Even now, as unemployment ravages the country, so-called industrial policy remains politically toxic. Legislators will not debate it; most will not even speak its name."

Further to the left on the political spectrum, writers such as Leo Hindery recognize that "America's manufacturing sector must be a cornerstone of the nation's economy and thus one of the essential drivers of the recovery we are still searching for." He calls for a requirement that government purchase goods made in America, a tax credit for rebuilding existing American factories, eliminating the tax credit for off-shoring factories, and enacting a temporary trade tariff, among other policies. He also advocates for a national infrastructure bank and extending various programs to help with the creation of a green energy economy. In a similar vein, Dave Johnson of the Campaign For America's Future writes about a multi-pronged set of policies to revive manufacturing: deal with the trade imbalance with China by pushing it to stop making its currency artificially weak, have the government purchase American-made goods, implement a price on carbon in order to encourage a transition to a green economy, and create an industrial policy, for instance with tax incentives and training programs. He also argues that the president could embark on many of these policies now.

While all of these proposals would be a giant step forward politically, and in fact are probably beyond the limit of feasibility in this age of rabid Republican opposition, unfortunately they only begin to put us on the path to a world-class manufacturing system. The Koreans, Chinese, and Japanese directly subsidize companies, make it easy for scientists and engineers to get degrees, aid the import of technology, help companies work together, and engage in many other techniques for building manufacturing industries. According to the New York Times, a partial cause of China's rise as a solar energy producer and the simultaneous decline of the United States comes from "free or subsidized land from local governments, extensive tax breaks and other state assistance... China has focused on building the competitiveness of the country's manufacturers." Since labor is a small part of solar panel costs, cheap labor has not been a key to success in China.

We could combine the ideas of a second stimulus, building a green infrastructure, and rebuilding the manufacturing economy by creating environmentally sustainable transportation, energy, and urban national systems, as I have argued. There are myriad examples of countries pulling themselves up the ladder of manufacturing competency, including the United States. The reality is that in order to be wealthy in the long-run, an economy must be based on manufacturing. As hard as it will be to move the politics of this country toward that reality, in the end it will be easier than making pretend that manufacturing is not important.

Jon Rynn is the author of the book Manufacturing Green Prosperity: The power to rebuild the American middle class, available from Praeger Press. He holds a Ph.D. in political science and is a Visiting Scholar at the CUNY Institute for Urban Systems.

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"Action and Action Now": America Can't Afford to Waste Its Human Resources

Sep 6, 2011David B. Woolner

Desperate times call for bold measures. President Obama need look no further than the WPA.

Desperate times call for bold measures. President Obama need look no further than the WPA.

To those who say that our expenditures for Public Works and other means for recovery are a waste that we cannot afford, I answer that no country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance... I stand or fall by my refusal to accept as a necessary condition of our future a permanent army of unemployed... [W]e must make it a national principle that we will not tolerate a large army of unemployed and that we will arrange our national economy to end our present unemployment as soon as we can and then to take wise measures against its return. - Franklin D. Roosevelt

With unemployment still hovering at over 9 percent nationwide, and with some economists and historians arguing that the present economic crisis should not be referred to as the "Great Recession," but as the "Great Depression II," a good deal of anticipation has arisen over what President Obama will propose in his message to Congress on Thursday. Despite widespread Republican opposition to further government spending, many economists and business leaders -- not to mention liberal members of the Democratic Party -- argue that what the country desperately needs is another stimulus package. A jobs program could provide hope and relief to the millions of long-term unemployed, restore confidence, and stem the U.S. economy's steady slide back into recession. Even the ever demure Chairman of the Federal Reserve, Ben Bernanke, has indicated that "putting people back to work" must be made a priority if the country wishes to avoid long-term damage to the economy.

Just over 75 years ago, in the midst of a long-term unemployment crisis not unlike the one we face today, President Roosevelt issued Executive Order 7034 to create one of the largest federal employment programs in American history: the Works Progress Administration (WPA). Roosevelt created the WPA in part out of his conviction that when the private sector fails to provide basic economic security in the form of employment to millions of Americans, it is right and proper for the government to step in to pick up the slack. Like President Obama, FDR presided over an economy that was expanding, in fact at a much faster rate than the meager growth we see today. But the growth was not strong enough to absorb the many millions still looking for work. Even though the unemployment rate had fallen by more than five percent since his assumption of office in 1933, FDR was not content to sit on his laurels and wait for the long hoped for return to full employment. So the president did what the American people expected him to do: he took action.

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Over the course of its eight-year history, the WPA employed approximately 8.5 million people, the vast majority of whom worked on projects aimed at rebuilding America's wholly inadequate 19th century infrastructure. That infrastructure was marked by feeble bridges, unpaved roads, little or no water or sewage treatment facilities, and tens of thousands of decrepit schools and other public buildings. Thanks to this massive effort, millions of Americans (including engineers, architects, and other skilled workers) gained meaningful employment and through their labor transformed the face of the nation. In New York City alone, for example, the WPA constructed the Triborough Bridge, the Lincoln Tunnel, FDR Drive, LaGuardia Airport, and the Belt, Grand Central, and Henry Hudson Parkways. It also rebuilt the Central Park Zoo, landscaped Bryant Park and Hunter College, and built or renovated hundreds of schools throughout the city -- not to mention put thousands of unemployed city teachers back to work in the newly constructed classrooms.

As this incomplete list of projects for New York City alone shows, the WPA was no "make work" operation, but a national endeavor aimed at transforming the nation's economic infrastructure and bringing the United States into the modern world by making use of our most precious resource: human capital. By the time it was finished, the WPA had constructed nearly 600,000 miles of rural roads, 67,000 miles of urban streets, 122,000 bridges, 1,000 tunnels, 1,050 airfields, 500 water treatment plants, 1,500 sewage treatment plants, 36,900 schools, 2,552 hospitals, 2,700 firehouses, and nearly 20,000 other state, county, and local government buildings. It was also widely popular among working Americans who wrote tens of thousands of letters to the White House thanking the president for his determination to counter the demoralizing effects of unemployment.

The infrastructure built by the WPA and other New Deal agencies helped lay the basis for the massive economic expansion that took place during World War II and the post-war years. All of us have benefited immensely from this visionary effort to simultaneously rebuild America and the American workforce. But after roughly 70 years, much of this infrastructure is in desperate need of replacement or repair.

If the president and Congress are serious about meeting the worst economic crisis this nation has endured since the Great Depression, remaining competitive in the global economy, and avoiding the atrophy of skills that comes after years of an idle workforce, then they should embrace the opportunity to rebuild America and the American workforce with the same sort of bold vision that inspired an earlier generation. With infrastructure that is now ranked a dismal 23rd among the world's industrialized states, and with millions of skilled and unskilled workers in desperate need of a job, this is no time for half measures. In light of this, isn't it time for the president to establish his own jobs program -- by executive order if necessary -- and to insist that Congress provide the funds needed to support it? The American people would no doubt support such a move. They understand that the real crisis in America is a jobs crisis, exasperated by a failure of leadership in Washington and the false obsession of Republican party extremists with cutting government spending at a time when we can least afford it. They are also tired of crumbling roads, burst levees, and collapsed bridges. They have heard enough talk of cuts, cuts, cuts when, in the spirit of the New Deal, they would much rather heed a call to "build, baby, build." Surely, as FDR said in his first inaugural, the time has come for "action and action now."

David Woolner is a Senior Fellow and Hyde Park Resident Historian for the Roosevelt Institute.

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Jeff Madrick on Countdown: "The American Job Machine is Broken"

Sep 5, 2011

Friday's jobs numbers came out just in time to make today's Labor Day celebration highly depressing. We can look forward to Obama's jobs speech this week, but will he say anything to turn the situation around? Roosevelt Institute Senior Fellow Jeff Madrick joined Keith Olbermann on Countdown to discuss what needs to be done. "The country is in a mess," Jeff says. "The American job machine is broken."

Friday's jobs numbers came out just in time to make today's Labor Day celebration highly depressing. We can look forward to Obama's jobs speech this week, but will he say anything to turn the situation around? Roosevelt Institute Senior Fellow Jeff Madrick joined Keith Olbermann on Countdown to discuss what needs to be done. "The country is in a mess," Jeff says. "The American job machine is broken."

Obama's jobs speech can't just be empty campaign rhetoric with an unemployment crisis like ours. "He has to be bold," Jeff says. After months of a stagnant economy, "he can say the facts changed," Jeff points out. "As John Maynard Keynes once said, 'When the facts change, I change my mind. What do you do, sir?'"

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So what are the solutions that could help real Americans? We can invest in infrastructure -- painfully obvious after Hurricane Irene -- and clean energy, Jeff suggests. On top of that, "it can be done through an FDR Washington hiring program," he points out. "There's a lot to be done in America," and Obama could take a page from the WPA and employ Americans to get it done.

None of this will come for free, but isn't it worth spending the money to put the country back on track? "What he can tell the American people is, 'Do you want a dumb deficit, or do you want a smart deficit?'" Jeff says. "If we don't do something bold we're going to get a dumb deficit and lots of people out of work and malaise. We can get a smart deficit and get us working again." The choice seems pretty obvious when Labor Day is marred by 9 percent unemployment.

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