Deficit hawks ignore the R-word

Harold Meyerson:

Of all the gaps between elite and mass opinion in America today, perhaps the greatest is this: The elites don't really believe we're still in recession. Or maybe, they just don't care.

How else to explain the continual harping on the deficit by editorialists, centrist think tanks and the like when the nation is still enmeshed in the most serious economic downturn since the 1930s? How else to understand the growing opposition to the jobs bills Congress is set to vote on this week, particularly when nobody has identified any future engine of American economic growth save countercyclical public investment?

It's not that the American people aren't concerned about the deficit. But in poll after poll, they make clear that their No. 1 concern is jobs. Forty-seven percent of respondents to a Fox News poll this month, for instance, said they were concerned with the economy and jobs, while just 15 percent acknowledged concern over the deficit and spending. Eighty-one percent of respondents to a Pew Research Center poll from this month thought it "very important" for Congress to address the jobs situation -- more than for any other topic. "There is no significant difference across party lines," Pew reported.

Beneath these numbers lies broad public anxiety over job loss and downward mobility. A Gallup survey from April showed that 21 percent of Americans feared they would lose their jobs or be laid off in the next 12 months, and that the percentage of respondents who believed they would find a job as good as the one they would lose if laid off had declined from 70 percent in 2001 to 64 percent in 2007 to just 42 percent last month.

This anxiety accurately reflects both the long- and short-term downward trajectory of work in America. As the U.S. economy has moved from a substantially unionized manufacturing base to a non-union service-sector workforce, working-class incomes have stagnated or declined. In the current downturn, those new college graduates able to find jobs often fail to find ones commensurate with their education. Northeastern University economist Andrew Sum calculates that only 51 percent of college graduates under 25 work in jobs that require a college degree, the New York Times reported on Tuesday.

Of course, no one at any point on the political spectrum has a complete prescription for what ails the American economy. But we do know how to preserve and create enough jobs to keep a recession from becoming a depression and, more particularly, how to keep still-reeling state and local governments from deepening the downturn by laying off thousands more workers. We did just that last year: The Obama stimulus Congress passed last winter saved or created what most economists estimate to be roughly 2 million jobs. For that matter, every major nation enacted a Keynesian stimulus last year, preventing a return to the agony of the 1930s.

These are achievements that the more nuanced deficit hawks acknowledge. But consider what happens when the question is whether the medicine that worked in 2009 should be taken again, in the smaller doses, in 2010, as the legislation before Congress this week would have it. The official unemployment rate is 9.9 percent; there are still more than five unemployed job seekers for every opening; and a record percentage of the unemployed have been jobless for more than six months.

Yet the deficit hawks' rejoinder is essentially: So what? Government spending is out of control. We need to cut back now.

The problem with this ostensible solution is twofold. First, it conflates short-term deficits needed to stanch the recession with long-term issues of fiscal sustainability. Such thinking risks turning a short-term recession into long-term stagnation, much as Japan did in the 1990s by failing to stimulate its economy sufficiently. Second, it calculates the dollar cost of the stimulus but neglects to factor in the dollar benefit from, for instance, keeping hundreds of thousands of teachers, police and firefighters on the job and paying taxes rather than collecting unemployment insurance. Once such particulars are accounted for, a new study from the liberal Economic Policy Institute argues, the cost of the jobs created in the bill coming before the House this week is more than halved, from $75 billion to $35 billion.

Those who oppose the jobs bills in the House and Senate this week should be compelled to answer some questions, starting with: Absent more stimulus, what do they see as the plausible engine of economic recovery? What effect will laying off as many as 300,000 teachers have on the education of American children? And, more elementally, don't they know there's a recession on?

Posted via email from Jim Nichols