What's Really Behind Yesterday's Unemployment Numbers?

Less than a third of Americans are stupid enough to have forgotten that it was Bush pushing failed Republican fiscal and economic ideology that drove the country to the brink of Depression. There's no data to back up this assertion, but I'm certain that these are the Glenn Beck, Rush Limbaugh, Fox die-hards, the core of angry, delusional teabaggery. I don't suppose that many people who watch Professor Know Nothing on Fox would understand the chart above anyway. That makes them qualified to run for the Senate in Teabaggia, where they would feel perfectly at home with the likes of Ken Buck (R-CO), Mike Lee (R-UT), Pat Toomey (R-PA), Marco Rubio (R-FL), Jim DeMint (R-SC), Rand Paul (R-KY), Joe Miller (R-AK), and, of course, Sharron Angle (R-NV).

In an interview this Wednesday, Nevada Republican Senate candidate Sharron Angle heightened her criticisms of unemployment insurance, insisting that the benefits program to help the jobless ended up benefiting nobody.
Sitting down with conservative radio talk show host Heidi Harris, Angle once again addressed a topic that brought her a bit of political heat-- including a hard-hitting ad from her opponent Harry Reid-- not too long ago.

"People don't want to be unemployed," she explained. "They want to have real, full-time, permanent jobs with a future. That's what they want, and we need to create that climate in Washington, D.C. that encourages businesses to create those full-time, permanent jobs with a future, and all [Rep.] Shelley Berkeley and [Senate Majority Leader] Harry Reid want to do is put a band-aid on this by extending unemployment, which really doesn't benefit anyone. What happens is of course that your skills stagnate. You become demoralized yourself, you know, feeling that I can't ever get a job, and these are not the solutions to the problem. We have real solutions, but they won't look at the real solutions."

Now, back on planet earth, Christina Romer explained the employment report yesterday within the context of the miserable situation in which conservative economic policies have driven the country. She said things came out "better than expected."

Private sector payrolls increased by 67,000 in August—the eighth consecutive month of private sector job growth. This growth is consistent with other recent data reports indicating that the economy is continuing to recover, albeit at a somewhat slower pace than in the early spring. The rate of job growth, however, is not as large as needed to bring the unemployment rate down quickly. Indeed, the unemployment rate rose one -- tenth of a percentage point to 9.6%, as more than half a million people joined the labor force. The President continues to work with his economic team and with Congress to identify measures that could help speed the recovery and put the economy on a path of steadily declining unemployment.

In addition to the rise in August, the estimates of private sector job growth for June and July were revised up by a total of 66,000. Since last December, private sector employment has risen by 763,000. Despite the rise in private sector employment, overall payroll employment fell by 54,000, as 114,000 temporary Census jobs were eliminated... [T]he number of people employed rose by 290,000. But, because the labor force rose by 550,000, the unemployment rate ticked up to 9.6% (from 9.5% in July). The employment-- to-- population ratio also rose one-- tenth of a percentage point (to 58.5%), indicating that in the household survey employment growth more than kept up with population growth. In addition, the number of workers who have been unemployed 27 weeks or longer declined sharply, from 6.57 million to 6.25 million.

As Obama pointed out at a press conference later, when he took office, the economy was hemorrhaging 750,000 jobs a month. He might not have done it as boldly as many of us wanted, but his efforts stopped that. "There’s no quick fix to the worst recession we've experienced since the Great Depression," he asserted. "The hard truth is that it took years to create our current economic problems, and it will take more time than any of us would like to repair the damage. Millions of our neighbors are living with that painfully every day."

But one thing we also have to do right now–- one thing we have a responsibility to do right now–- is to lift up our small businesses, which accounted for over 60 percent of job losses in the final months of last year. That's why once again, I’m calling on Congress to make passing a small business jobs bill its first order of business when it gets back into session later this month.

Now, here’s why this is so important. Up until this past May, we were not only waiving fees for entrepreneurs who took out Small Business Administration loans, we were also encouraging more community banks to make loans to responsible business owners. These steps are part of the reason about 70,000 new Small Business Administration loans have been approved since I took office. And I thank Karen Mills for the outstanding job she’s been doing as Administrator of the Small Business Administration.

We’ve also been extending-- fighting to extend these loan enhancements with a small business jobs bill. It’s a bill that will more than double the amount some small business owners can borrow to grow their companies. It will completely eliminate capital gains taxes on key investments, so small business owners can buy new equipment and expand. And it will accelerate $55 billion in tax cuts for businesses, large and small, that make job-creating investments in the next 14 months.

And keep in mind, it is paid for. It will not add one dime to our deficit. So, put simply, this piece of legislation is good for workers; it’s good for small business people; it’s good for our economy. And yet, Republicans in the Senate have blocked this bill-- a needless delay that has led small business owners across this country to put off hiring, put off expanding, and put off plans that will make our economy stronger.

The bill, HR 5297 was filibustered by Republicans in the Senate, where it was stalled. Reid managed to hold even the worst conservative Democratic corporate shills together. If Obama is going to attack Republicans for the bill's failure to move forward-- as he certainly should-- it will sound a lot more convincing and less partisan if he mentions that 9 Democratic corporate shills in the House also voted against it: Marion Berry (Blue Dog-AR), Allen Boyd (Blue Dog-FL), Bobby Bright (Blue Dog-AL), Jim Cooper (Blue Dog-TN), Kathy Dahlkemper (Blue Dog-PA), Stephanie Herseth Sandlin (Blue Dog-SD), Harry Mitchell (Blue Dog-AZ), Gene Taylor (Blue Dog-MS) and Dina Titus (D-NV). Three Republicans, Ahn Cao (LA), Mike Castle (DE), and Walter Jones (NC), decided its too close to election time to screw their own constituents over again and follow Boehner down the road he's chosen-- driving the economy deeper into a ditch in the hopes it will win him the Speaker's job.

Thursday former Labor Secretary Robert Reich did an OpEd for the NY Times, How to End the Great Recession. His knows as well as anyone how the corporatist agenda of greed and selfishness caused the economic collapse but his prescriptions are unlikely to be welcomed by a team headed up by notorious Wall Street shills like Rahm Emanuel, Tim Geithner and Lawrence Summers. He attributes our problems to the fact that consumers can't spend us out of the recession, because they have no money. "The real problem," he says, "has to do with the structure of the economy, not the business cycle."

This crisis began decades ago when a new wave of technology-- things like satellite communications, container ships, computers and eventually the Internet -- made it cheaper for American employers to use low-wage labor abroad or labor-replacing software here at home than to continue paying the typical worker a middle-class wage. Even though the American economy kept growing, hourly wages flattened. The median male worker earns less today, adjusted for inflation, than he did 30 years ago.

But for years American families kept spending as if their incomes were keeping pace with overall economic growth. And their spending fueled continued growth. How did families manage this trick? First, women streamed into the paid work force. By the late 1990s, more than 60 percent of mothers with young children worked outside the home (in 1966, only 24 percent did).

Second, everyone put in more hours. What families didn’t receive in wage increases they made up for in work increases. By the mid-2000s, the typical male worker was putting in roughly 100 hours more each year than two decades before, and the typical female worker about 200 hours more.

When American families couldn’t squeeze any more income out of these two coping mechanisms, they embarked on a third: going ever deeper into debt. This seemed painless-- as long as home prices were soaring. From 2002 to 2007, American households extracted $2.3 trillion from their homes.

Eventually, of course, the debt bubble burst-- and with it, the last coping mechanism. Now we’re left to deal with the underlying problem that we’ve avoided for decades. Even if nearly everyone was employed, the vast middle class still wouldn’t have enough money to buy what the economy is capable of producing.

Where have all the economic gains gone? Mostly to the top. The economists Emmanuel Saez and Thomas Piketty examined tax returns from 1913 to 2008. They discovered an interesting pattern. In the late 1970s, the richest 1 percent of American families took in about 9 percent of the nation’s total income; by 2007, the top 1 percent took in 23.5 percent of total income.

It’s no coincidence that the last time income was this concentrated was in 1928. I do not mean to suggest that such astonishing consolidations of income at the top directly cause sharp economic declines. The connection is more subtle.

The rich spend a much smaller proportion of their incomes than the rest of us. So when they get a disproportionate share of total income, the economy is robbed of the demand it needs to keep growing and creating jobs.

What’s more, the rich don’t necessarily invest their earnings and savings in the American economy; they send them anywhere around the globe where they’ll summon the highest returns-- sometimes that’s here, but often it’s the Cayman Islands, China or elsewhere. The rich also put their money into assets most likely to attract other big investors (commodities, stocks, dot-coms or real estate), which can become wildly inflated as a result.

Meanwhile, as the economy grows, the vast majority in the middle naturally want to live better. Their consequent spending fuels continued growth and creates enough jobs for almost everyone, at least for a time. But because this situation can’t be sustained, at some point-- 1929 and 2008 offer ready examples-- the bill comes due.

This time around, policymakers had knowledge their counterparts didn’t have in 1929; they knew they could avoid immediate financial calamity by flooding the economy with money. But, paradoxically, averting another Great Depression-like calamity removed political pressure for more fundamental reform. We’re left instead with a long and seemingly endless Great Jobs Recession.

The Great Depression and its aftermath demonstrate that there is only one way back to full recovery: through more widely shared prosperity. In the 1930s, the American economy was completely restructured. New Deal measures-- Social Security, a 40-hour work week with time-and-a-half overtime, unemployment insurance, the right to form unions and bargain collectively, the minimum wage-- leveled the playing field.

In the decades after World War II, legislation like the G.I. Bill, a vast expansion of public higher education and civil rights and voting rights laws further reduced economic inequality. Much of this was paid for with a 70 percent to 90 percent marginal income tax on the highest incomes. And as America’s middle class shared more of the economy’s gains, it was able to buy more of the goods and services the economy could provide. The result: rapid growth and more jobs.

By contrast, little has been done since 2008 to widen the circle of prosperity. Health-care reform is an important step forward but it’s not nearly enough.

What else could be done to raise wages and thereby spur the economy? We might consider, for example, extending the earned income tax credit all the way up through the middle class, and paying for it with a tax on carbon. Or exempting the first $20,000 of income from payroll taxes and paying for it with a payroll tax on incomes over $250,000.