FacebookTwitterGoogle+RedditEmail

How to Reduce Unemployment and Revive the Economy

by MARK WEISBROT

As President Obama begins the second half of his term with a campaign for “jobs and competitiveness,” we would do well to consider how he might achieve these worthy goals. It is jobs that matter most to the vast majority of Americans, and unemployment remains at 9.4 percent – about double its pre-recession level. This is a terrible punishment to inflict on millions of Americans who did nothing to deserve it. It will cause long-term and even permanent damage to many of the unemployed and their children.

What can the government do to relieve this suffering? One relatively simple measure is to subsidize employers who are willing to reduce hours rather than lay people off. Germany has demonstrated the success of this approach in the last couple of years. Unemployment in Germany was 7.4 percent just before their recession began in the third quarter of 2008. Today it is 6.7 percent. And Germany had a much steeper decline in output than we did.

The idea is straightforward: employers who are faced with reduced demand can either lay off workers or reduce hours. If they reduce hours for any worker, the government in Germany puts up 60 percent of the lost pay for these reduced hours. The worker keeps her job, with reduced hours but the pay is not reduced nearly as much.

With all this talk now about Democrats and Republicans “reaching across the aisle” and working together, a program that is acceptable to a conservative German government ought to have bi-partisan appeal here. The government can use unemployment insurance funds to cover much of the cost, and seventeen states do offer such work-sharing programs. But they are under-funded and participation is small.

My colleague Dean Baker estimates that this program can create three million jobs at a cost of $68 billion. That is less than one-tenth of our bloated Pentagon budget. Imagine a national poll where voters were to choose between continuing to occupy Afghanistan versus creating three million jobs? (Actually about 4.6 million jobs if we really get out of there). A no-brainer.

Another proposal that would help boost the economy, and wouldn’t cost the taxpayers anything would be to allow homeowners who are underwater on their mortgages to become long-term renters. An independent appraiser would set the fair market rent for their home. Millions of homeowners who bought homes at bubble-inflated prices would see a sizeable reduction in their monthly payment. Others would find that their bank, not wanting to be a landlord, would negotiate a reduced mortgage payment. This program would free a lot of people from the prolonged stress and uncertainty of unpayable debt, and boost consumer demand.

Of course demand for goods and services is what is needed to achieve the growth that will boost the economy and provide jobs. Unfortunately, it is not enough for the President to kiss up to business by appointing their friends to high places, or slathering more tax breaks on them. Our corporations are already sitting on more than $2 trillion of cash; they are not expanding or hiring because there is not enough demand out there for what they can already produce. The bursting of the housing and commercial real estate bubbles will limit demand in those sectors for years to come.

That means that the federal government will have to pick up some of the slack. At the very least it should subsidize the state and local governments so they stop laying people off and raising taxes – thus shrinking the economy and employment further while making this a less educated country. It would be nice to see President Obama take some leadership on these issues, even if it means having to fight for what is right.

MARK WEISBROT is an economist and co-director of the Center for Economic and Policy Research. He is co-author, with Dean Baker, of Social Security: the Phony Crisis.

This column was originally published by the Sacramento Bee.

 

 

Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. and president of Just Foreign Policy. He is also the author of  Failed: What the “Experts” Got Wrong About the Global Economy (Oxford University Press, 2015).

More articles by:
May 31, 2016
Miguel A. Cruz-Díaz
Imperial Blues: On Whitewashing Dictatorship in the 21st Century
Vijay Prashad
Stoking the Fires: Trump and His Legions
Uri Avnery
What Happened to Netanyahu?
Corey Payne
Reentry Through Resistance: Détente with Cuba was Accomplished Through Resistance and Solidarity, Not Imperial Benevolence
Patrick Howlett-Martin
Libya: How to Bring Down a Nation
Bill Quigley
From Tehran to Atlanta: Social Justice Lawyer Azadeh Shahshahani’s Fight for Human Rights
Manuel E. Yepe
Trump, Sanders and the Exhaustion of a Political Model
Bruce Lerro
“Network” 40 Years Later: Capitalism in Retrospect and Prospect and Elite Politics Today
Robert Hunziker
Chile’s Robocops
Aidan O'Brien
What’ll It be Folks: Xenophobia or Genocide?
Binoy Kampmark
Emailgate: the Clinton Spin Doctors In Action
Colin Todhunter
The Unique Risks of GM Crops: Science Trumps PR, Fraud and Smear Campaigns
Dave Welsh
Jessica Williams, 29: Another Black Woman Gunned Down By Police
Gary Leupp
Rules for TV News Anchors, on Memorial Day and Every Day
May 30, 2016
Ron Jacobs
The State of the Left: Many Movements, Too Many Goals?
James Abourezk
The Intricacies of Language
Porfirio Quintano
Hillary, Honduras, and the Murder of My Friend Berta
Patrick Cockburn
Airstrikes on ISIS are Reducing Their Cities to Ruins
Uri Avnery
The Center Doesn’t Hold
Raouf Halaby
The Sailors of the USS Liberty: They, Too, Deserve to Be Honored
Rodrigue Tremblay
Barack Obama’s Legacy: What Happened?
Matt Peppe
Just the Facts: The Speech Obama Should Have Given at Hiroshima
Deborah James
Trade Pacts and Deregulation: Latest Leaks Reveal Core Problem with TISA
Michael Donnelly
Still Wavy After All These Years: Flower Geezer Turns 80
Ralph Nader
The Funny Business of Farm Credit
Paul Craig Roberts
Memorial Day and the Glorification of Past Wars
Colin Todhunter
From Albrecht to Monsanto: A System Not Run for the Public Good Can Never Serve the Public Good
Rivera Sun
White Rose Begins Leaflet Campaigns June 1942
Tom H. Hastings
Field Report from the Dick Cheney Hunting Instruction Manual
Weekend Edition
May 27, 2016
Friday - Sunday
John Pilger
Silencing America as It Prepares for War
Rob Urie
By the Numbers: Hillary Clinton and Donald Trump are Fringe Candidates
Paul Street
Feel the Hate
Daniel Raventós - Julie Wark
Basic Income Gathers Steam Across Europe
Andrew Levine
Hillary’s Gun Gambit
Jeffrey St. Clair
Hand Jobs: Heidegger, Hitler and Trump
S. Brian Willson
Remembering All the Deaths From All of Our Wars
Dave Lindorff
With Clinton’s Nixonian Email Scandal Deepening, Sanders Must Demand Answers
Pete Dolack
Millions for the Boss, Cuts for You!
Gunnar Westberg
Close Calls: We Were Much Closer to Nuclear Annihilation Than We Ever Knew
Peter Lee
To Hell and Back: Hiroshima and Nagasaki
Karl Grossman
Long Island as a Nuclear Park
Binoy Kampmark
Sweden’s Assange Problem: The District Court Ruling
Robert Fisk
Why the US Dropped Its Demand That Assad Must Go
Martha Rosenberg – Ronnie Cummins
Bayer and Monsanto: a Marriage Made in Hell
Brian Cloughley
Pivoting to War
FacebookTwitterGoogle+RedditEmail