Unfazed by Reality
By Bob Herbert
NY Times Op-Ed: June 14, 2010
Imagine that you've got the gas pedal to the floor (or almost to the floor)
as you try to get your vehicle to the top of a mountain, where the road will
level off. You've made real progress, but the vehicle is straining and
wheezing. You're not there yet.
Why in the world would you lift your foot off the gas and risk rolling back
down the mountain?
Something like this is happening in the fight to haul the United States out
of the depths of the worst recession since the Great Depression. The deficit
hawks - policy makers from the very same crowd whose crazy theories and
rampant irresponsibility got us into this terrible fix in the first place -
want the United States to step off of the stimulus gas, a move that might
very well stall the current, extremely fragile recovery.
The latest struggle on this front has to do with the crucially important
issue of federal relief to state and local governments, which are facing
nightmarish budget scenarios. Consider the following comment from General
Davie Jr., the chief of the Natomas Unified School District in Sacramento
County, Calif.:
"We made the decision to close our eight elementary school libraries with a
heavy heart, but our budget situation is so dire that we had no choice.
We've
also cut all of our health aides, eliminated busing, shortened our school
year by five days, increased K-3 class sizes to 30 to 1, and issued layoff
notices to about 30 percent of our teachers, classified staff and
administration."
Similar decisions, potentially devastating to the lives of individuals and
families and poisonous to the effort to rebuild the economy, are being made
by state and local officials from one coast to the other. State and local
governments are obliged by law in nearly all cases to balance their budgets,
but their revenues have fallen off a cliff because of the long economic
downturn. Thus, they are slashing away at important government services,
laying off workers and raising fees and taxes.
For the federal government to stand by like a disinterested onlooker as this
carnage plays out would be crazy.
President Obama has called on Congress to provide substantial relief to
these localities to ward off the harmful impact of the budget cuts. In a
letter to Congressional leaders of both parties, he said he was concerned
that "the lingering economic damage" of the financial downturn "has left a
mounting employment crisis at the state and local level that could set back
the pace of our economic recovery."
He urged quick action to prevent the budget cuts from leading to "massive
layoffs" of teachers, police officers, firefighters and other public
employees.
Congress had already been considering legislation that would provide
something approaching $50 billion in aid to states: $24 billion to offset
increased costs in the states' share of Medicaid payments and $23 billion
for teachers' salaries. But the constant chatter from Republicans and
increasing numbers of Democrats about rising federal budget deficits has
stymied those efforts.
The concerns about the effect that this aid might have on long-term federal
deficits are misplaced, because the effect would be barely noticeable - if
at all. But if Congress doesn't act, the impact in the here and now will be
both powerful and painful. The secretary of education, Arne Duncan, has
warned that the nation could face an "education catastrophe" if the federal
government fails to provide assistance to prevent the loss of 100,000 to
300,000 public school jobs.
Nicholas Johnson, the director of the State Fiscal Project at the Center on
Budget and Policy Priorities, told me in an interview on Monday: "We've
already seen in the first quarter of this year that state budget actions
lopped half a percentage point off of G.D.P. growth, knocking it from 3 1/2
percent down to 3 percent. To put it in terms of jobs, the actions of state
and local governments right now are taking a little over 20,000 jobs out of
the economy each month. That's what it was in May, and there is every reason
to believe it will continue unless the states get some assistance."
When you put people out of work, you cripple the quality of life of their
entire families. When you start dismantling the public schools and driving
teachers from the classrooms, you damage - and in many instances cripple -
the lifetime prospects of untold numbers of pupils. When you undermine a
recovery that is as fragile as this one, which is as fragile as a crate of
eggs, you undermine the economic health of the entire nation.
These are the kinds of disasters that the deficit hawks, secure in their
ideological dream world, are quite happily prepared to live with.
***
http://www.laprogressive.com/economic-equality/double-dip-recession/
A Double-Dip Recession Coming?
By Robert Reich
The LAProgressive: June 5, 2010
We're falling into a double-dip recession.
The Labor Department reports this morning that the private sector added a
measly 41,000 net new jobs in May. (The vast bulk of new jobs in May were
temporary government Census workers.) But at least 100,000 new jobs are
needed every month just to keep up with population growth.
In other words, the labor market continues to deteriorate.
The average length of unemployment continues to rise - now up to 34.4 weeks
(up from 33 weeks in April). That's another record.
More Americans are too discouraged to look for a job than last year at this
time (1.1 million in May, an increase of 291,000 from a year earlier.)
Of the small number of jobs created by the private sector in May, many came
from temporary help services.
Which is one reason why the median wage continues to drop.
Why are we having such a hard time getting free of the Great Recession?
Because consumers, who constitute 70 percent of the economy, don't have the
dough. They can't any longer treat their homes as ATMs, as they did before
the Great Recession.
Businesses won't rehire if there's not enough demand for their goods and
services.
The only reason the economy isn't in a double-dip recession already is
because of three temporary boosts: the federal stimulus (of which 75 percent
has been spent), near-zero interest rates (which can't continue much longer
without igniting speculative bubbles), and replacements (consumers have had
to replace worn-out cars and appliances, and businesses had to replace
worn-down inventories). Oh, and, yes, all those Census workers (who will be
out on their ears in a month or so).
But all these boosts will end soon. Then we're in the dip.
Retail sales are already down.
So what's the answer? In the short term, more stimulus - especially extended
unemployment benefits and aid to state and local governments that are
whacking schools and social services because they can't run deficits.
But the deficit crazies in the Senate, who can't seem to differentiate
between short-term stimulus (necessary) and long-term debt (bad) last week
shot it down.
In the longer term, we need a new New Deal that will bolster America's
floundering middle class.Most prior recessions were caused by the Fed
over-shooting in trying to control inflation by raising interest rates too
high. So the garden-variety recession could be reversed by the Fed reversing
itself and lowering rates. But the Great Recession was caused by the
bursting of a huge housing bubble. And that can't be reversed without a
major restructuring of the economy because housing prices won't be back to
where they were - and won't be rising above that peak - for years.
We have to get to the core problem: a middle class that doesn't have the
dough to buy the goods and services the economy is capable of produciing.
Where to start? Expand the Earned Income Tax Credit and extend it up through
the middle class. Finance that extension through higher marginal income
taxes on the wealthy, who have never had it so good.
Robert Reich
This article first appeared on Robert Reich's Blog. Republished with
permission
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