FacebookTwitterGoogle+RedditEmail

How to Reduce Unemployment and Revive the Economy

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.

 

 

More articles by:

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).

January 24, 2019
David Rosen
Roe: 47 Years and Counting
Joseph Essertier
Warmongering Over Warmbier: US Hypocrisy and a Double Standard on North Korea
Glenn Sacks
L.A. Teachers Strike Dispatch #9: What We Won
M. G. Piety
An Essay on Grief
Karen J. Greenberg
Creating a Global Lost Generation
Jesse Jackson
America Has Lost Its Common Sense
Noa Mendelsohn Aviv
Rebranding Canada’s Solitary Confinement Policy Doesn’t Change What It Is
Ramzy Baroud
False ‘Victories’: Is the PA Using the ‘State of Palestine’ to Remain in Power?
Binoy Kampmark
Eyeing the White House: the Democratic Field
Russell Mokhiber
Single Payer Gold Standard HR 676 Rest in Peace
David Swanson
The World Will End in Fire
David Macaray
Celebrity Bullshit
Dean Baker
How Worried Should We be If China’s Growth Rate Slows to 6.4%?
Wim Laven
What Makes America Great?
January 23, 2019
Paul Street
Time for the U.S. Yellow Vests
Charles McKelvey
Popular Democracy in Cuba
Kenn Orphan
The Smile of Class Privilege
Leonard Peltier
The History Behind Nate Phillips’ Song
Kenneth Surin
Stalled Brexit Goings On
Jeff Cohen
The System’s Falling Apart: Were the Dogmatic Marxists Right After All?
Cira Pascual Marquina
Chavez and the Continent of Politics: a Conversation with Chris Gilbert
George Ochenski
Turning Federal Lands Over to the States and Other Rightwing Fantasies
George Wuerthner
Forest Service Ignores Science to Justify Logging
Raouf Halaby
In the Fray: Responses to Covington Catholic High
Kim C. Domenico
No Saviors But Ourselves; No Disobedience Without Deeper Loyalty
Ted Rall
Jury Trial? You Have No Right!
Michael Doliner
The Pros and Cons of Near Term Human Extinction
Lee Ballinger
Musical Unity
Elliot Sperber
The Ark Builders
January 22, 2019
Patrick Cockburn
On the Brink of Brexit: the Only Thing Most People Outside Westminster Know About Brexit is That It’s a Mess
Raouf Halaby
The Little Brett Kavanaughs from Covington Catholic High
Dean Baker
The Trump Tax Cut is Even Worse Than They Say
Stanley L. Cohen
The Brazen Detention of Marzieh Hashemi, America’s Newest Political Prisoner
Karl Grossman
Darth Trump: From Space Force to Star Wars
Glenn Sacks
Teachers Strike Dispatch #8: New Independent Study Confirms LAUSD Has the Money to Meet UTLA’s Demands
Haydar Khan
The Double Bind of Human Senescence
Alvaro Huerta
Mr. President, We Don’t Need Your Stinking Wall
Howard Lisnoff
Another Slugger from Louisville: Muhammad Ali
Nicole Patrice Hill – Kollibri terre Sonnenblume
The Scarlet “I”: Climate Change, “Invasive” Plants and Our Culture of Domination
Jonah Raskin
Disposable Man Gets His Balls Back
Thomas Knapp
Now More Than Ever, It’s Clear the FBI Must Go
January 21, 2019
W. T. Whitney
New US Economic Attack Against Cuba, Long Threatened, May Hit Soon
Jérôme Duval
Macronist Repression Against the People in Yellow Vests
Dean Baker
The Next Recession: What It Could Look Like
Eric Mann
All Hail the Revolutionary King: Martin Luther King and the Black Revolutionary Tradition
FacebookTwitterGoogle+RedditEmail