Obama's Lack of Ideology Leading to Job Creation Debacle

by Frank Thomas and John Lawrence

Obama seems to be counting on the fact that the economy will recover on its own after the initial stimulus package. It's starting to look like this was a bad bet. The Republicans of course have their job creation plan in place: lower taxes especially on the rich, less government spending and more deregulation or, in other words, the continuation of the transfer of wealth from the poor and middle class to the rich. However, this is precisely what has ruined the economy. As Robert Reich, Bernie Sanders, Paul Krugman and others have been saying repeatedly, the government has to spend more to create jobs and raise the money to do so by a variety of mechanisms like a financial transaction tax, doing away with subsidies for oil and agriculture, closing tax loopholes for corporations, raising taxes on millionaires and billionaires etc. Obama is in the weak position of not having an ideological counter to the Republican ideology. The Democrats need to develop an ideological position based on Keynesian economics to counter the Republicans. Obama's "Republican lite" philosophy will probably result in his losing the next election if the economy continues to sputter and stagnate. His position seems to be the Republican position only not quite as severe. What is needed is a complete repudiation of trickle down economics, union busting, the "small government" mantra, and the wealthy as "job creators." The Democrats need an ideological consistency to counter the Republicans who are extremely ideologically consistent.

 

Most of the jobs being created are temp jobs and lousy jobs at less than a living wage. The Democrats are not addressing this and they need to. The Democrats need to state loudly and clearly that the government needs to be the job creator of last resort. If private enterprise cannot create the jobs to provide for a full employment economy, then government must step in and fund infrastructure repair projects and even a WPA style work program. We need to get over the notion that the only legitimate government job creation program is in the military.

 

Obama's Administration and the Republicans are either brain mute or unwilling (out of fear of increasing America's indebtedness now with CONSTRUCTIVE PUBLIC DEBT financed investments ) to recognize the deeply structural character of our nation's declining rate of job generation shown in Frank's 30 year trend summary (The U.S. Ongoing Structural Unemployment Calamity).           

 

The 50,000 job generation in May doesn't surprise us. In the 80s and 90s decades about 36-38 million jobs  were created (averaging 18-20 million per decade: see Advance and Rutgers study). In the first decade of the 21st century, depending on which study numbers one uses, U.S. job generation was either a shockingly negative -0.4 million up to -2.1 million including labor force growth. 

To summarize again this disastrous trend based on Advance & Rutgers 1982-2009 and BLS 2010-11 data:

 

                                                ANNUAL AVE. JOB GROWTH      TOTAL

 

Nov.1982-July 1990 Expansion            2,401,800                     18.4 Mil.

                            

Mar. 1991-Mar. 2001 Expansion          2,150,000                     21.5 Mil.

 

Nov. 2001-Dec. 2007 Expansion          1,020,550                       6.2 Mil.

 

Jan. 2008-Dec.2009 RECESSION      - 4,600,000 (a)              -9.2 Mil. (a)

  

Jan.2010- Dec. 2010 RECOVERY              850,000                       0.9 Mil.

 

Jan. 2011- May 2100 RECOVERY              700,000                       0.7 Mil.

 

(a) Includes unfulfilled job need of 1.7 million to meet labor force growth.

                                                                  

 

As everyone has learned a few thousand times over by now, we have 14 million officially unemployed and another 8-10 million underemployed (the latter at below-subsistence wage levels). As was reported in a recent writing, this overall situation is far worse than that of the better performing, mature European countries (excepting the high jobless levels in Spain, Ireland, Greece and Portugal). 

 

AUSTERITY (get rid of waste), REFORM  (Medicare, Soc. Security, Defense Spending, Tax System/Avoidance)  and INVEST (in high-return projects, training) to produce jobs should be Obama's no-holds-barred leadership call. We are on the path of being mired in a long lasting economic malaise similar to Japan's experience during 1992-2002  -- where their debt as a % of GDP rose from 62% to 174% in 2004 and even higher now. Japan covered their explosive annual debt cost with exceptionally strong net export surpluses up to 2008. Now, with sharply deteriorating net export balances, their high debt level is becoming an unquestionably dangerous financial burden.

 

If we migrate to a Japan 10 year stagnant-type malaise, we will be in BIG financial trouble because we have no trade surpluses, only enormous annual trade deficits simultaneously with a mountain of public debt escalated in the Great Recession bubble of Bush's Presidency and by the government's costly rescue efforts of selected financial institutions.

 

As repeated many times, our economic growth model of extreme dependence on CONSUMPTION (70% of GDP vs. 60% in Europe) with almost Zero Savings (vs. 10-12% in Europe) and net export deficits of $45-60 billion a month, along with low PUBLIC and PRIVATE Investments (vs. higher infrastructure and R&D investment levels in Europe) is NOT SUSTAINABLE. European countries, like Holland, Germany and others, realize that Public investment spending, joint private-public ventures and  sensible, affordable military spending (+-1.7% of GDP vs. +-5.5% in U.S.) much more significantly and effectively increase GDP, jobs, incomes and tax revenues in the short and long term. All this means that we need new ideas to get our social-economic model structurally as well as fiscally balanced to improve societal well-being ... to stop the destruction of human capital through impoverishment of the middle-class.

The Democrats need to fine tune their ideological stance and confront the Republican ideology head on. They can't just be pragmatic. Pragmatism looks a lot like wishy-washiness when confronted by an aggressive, confrontational ideology like the Republicans espouse. And Obama cannot simply cross his fingers and hope that the "experts" are right when they say that the American economy will just recover by itself and on its own without any further efforts on his part.