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We Need a Bolder Response

Our economic circumstances, with persistent high unemployment, dedicate bolder policy initiatives.  This quarterly debate over extension of unemployment compensation will be repeated for some time if economic forecasts for meager economic growth are accurate.  It doesn’t have to be this way.

Here is a disturbing conclusion from a recently released study by the Center for Economic Policy and Research:

Many lawmakers, policymakers, and economic commentators do not appear to recognize the depth of the current labor-market recession. If job growth from July 2010 forward proceeds at the same pace as the fastest four years of the 2000s expansion, the economy will not return to the December 2007 employment level until March 2014, well after the next presidential election; and the economy will not catch up to the intervening increase in the labor force until early in the next decade (April 2021). Even at the somewhat faster job creation rates currently projected by the CBO, we will not return to pre-recession employment levels until after the 2012 election (June 2013), and not make up for the expanded labor force until the second half of the next presidential term (August 2015).

We can’t wait that long for normal job growth to return.  Current policy proposals including extension of unemployment compensation or even various business tax credits are not enough to address the enormous jobs hole we are in.  We need much better.

The U.S. Chamber of Commerce (trade group for big multi-national corporations) says businesses are not hiring because of expectation of higher taxes and regulatory uncertainty.  This is utter non-sense.  The reason businesses are not hiring is because the demand for products and services is not there and why is it not there - easy, because of high unemployment and people concerned about their jobs. 

The choice is simple: endure relatively high unemployment for years to come or try to fix it now.  Fixing it now will require higher budget deficit. 

Following are just a few things that can be done:

1) Warren Mosler plan:  a) full payroll tax holiday (for both employer and employee); b) revenue sharing distribution (grant) to states on per capita basis; c) a direct jobs program - Employer of Last Resort Program.

2) Extending and expanding TANF Emergency Fund - due to expire September 30, 2010.

3) Three ideas from Newsweek article “Three Big Ideas for Solving Unemployment”.

I am biased in favor of Warren Mosler’s plan because I believe the economics behind it are solid.  The point is that there are options and our current actions are not rising to meet the economic challenges that we face.  If we want to get out of the jobs hole we are in before 2021 (or even 2015) the budget deficit will have to increase - there is no way to avoid it. 

Good luck. 

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