Debt Surrender Makes Creating Jobs Impossible

Yeah, looks like the eleventy-dimensional chess master got beat at his own game.

Robert Reich:

But what pre­cisely will he fight for now that the debt deal has tied his hands?

He says he wants to ex­tend tax cuts for mid­dle class fam­i­lies and make sure the job­less get un­em­ploy­ment ben­e­fits.

Fine, but the new deal won’t let him. He’ll have to go back to Con­gress after the re­cess (five weeks from now) and round up enough votes to over­ride the bud­get caps that now re­strict spend­ing. What are the odds? Maybe a lit­tle higher than zero.

He says he wants an “in­fra­struc­ture bank” that would bor­row money from pri­vate cap­i­tal mar­kets to pay pri­vate con­trac­tors to re­build our na­tions roads, bridges, air­ports, and every­thing else that’s falling apart.

Fine, but the new deal he just signed may not let him do this ei­ther – if the in­fra­struc­ture bank re­lies on fed­eral funds or even fed­eral loan guar­an­tees to at­tract pri­vate money. The only way he could cre­ate an in­fra­struc­ture bank with­out sweet­en­ing the pot would be by pri­va­tiz­ing all the new in­fra­struc­ture. That means toll roads and toll bridges, user-fee air­ports, and entry fees every­where else.

Apart from its po­ten­tial un­fair­ness to lower-in­come peo­ple, such a pri­va­tized in­fra­struc­ture would have the same ef­fect as a tax in­crease. After pay­ing more for roads and bridges and all other in­fra­struc­ture, Amer­i­cans would have less cash for to spend on goods and ser­vices. That means no boost to the econ­omy.

The Pres­i­dent also wants to com­plete trade deals and re­form the patent process. These may make the econ­omy slightly more ef­fi­cient, but they’re not going to have any per­cep­ti­ble pos­i­tive im­pact on the lives of the 26 mil­lion Amer­i­cans who are now ei­ther look­ing for work, work­ing in part-time jobs but need­ing full-time ones, or have given up look­ing.

More im­por­tantly, the deal he just signed makes it im­pos­si­ble for the Pres­i­dent and De­moc­rats to launch any major jobs pro­gram – no WPA or Civil­ian Con­ser­va­tion Corps, no major lend­ing pro­gram to cash-starved states and lo­cales, no new help for dis­tressed home­own­ers, and so on. Nada.

“We’ve got to do every­thing in our power to grow this econ­omy and put Amer­ica back to work,” the Pres­i­dent says, now that the hostage cri­sis is over.

But the sad truth is he and the na­tion re­main hostage to the ide­ol­ogy of right-wing Re­pub­li­cans who won’t let the gov­ern­ment spend more money. Yet if the gov­ern­ment can’t spend more – at least this year and next, until the pump is primed and the econ­omy is grow­ing again – we won’t see job growth. And with­out job growth, the econ­omy will re­main ane­mic.

That’s why even the stock mar­ket is re­act­ing badly to the end of the hostage cri­sis.

If you hadn’t no­ticed, the num­ber of peo­ple un­em­ployed or un­der­em­ployed keeps grow­ing. (We’ll know Fri­day how many it added in July, but re­mem­ber it needs to add 125,000 a month just to keep up with the growth of the labor force. Any­thing below 125,000 means we con­tinue to slide back­ward.)

The rea­son: Con­sumers, who are 70 per­cent of the econ­omy, haven’t been able to pick up the slack. That’s be­cause they’re still deep in debt. Their homes have plum­meted in value. They can’t bor­row. Their jobs are on the line and their wages are drop­ping.

So where will the de­mand come from if not gov­ern­ment? The rad­i­cal right points to the al­leged “fail­ure” of the stim­u­lus pro­gram as ev­i­dence that gov­ern­ment spend­ing doesn’t work. The fact is it did work – it saved at least 3 mil­lion jobs, and would have saved far more if the stim­u­lus was on the scale needed and di­rected to job cre­ation.

To be sure, pump-prim­ing is more dif­fi­cult when the well is al­most dry, as it is now. And widen­ing in­equal­ity – the rich tak­ing home an in­creas­ing share of the na­tion’s total in­come and wealth – has left the vast mid­dle class with even less pur­chas­ing power.

But the pump still needs to be primed.

And the well has to be filled: The na­tion must also push for real tax re­form that re­verses the surge to­ward in­equal­ity – rais­ing taxes on the wealthy, cut­ting them for the mid­dle, and ex­pand­ing the Earned In­come Tax Credit for the poor.

To do this, though, re­quires that Amer­i­cans un­der­stand the truth. But where will they learn it?

The rad­i­cal right has not only cap­tured the fed­eral bud­get. In con­vinc­ing so many Amer­i­cans the prob­lem is the size of gov­ern­ment rather than their shrink­ing pay­checks and grow­ing eco­nomic in­se­cu­rity, the rad­i­cal right has also cap­tured the Amer­i­can mind.

Liberals know the truth about the economy - we've known it all along. Now we have to stop nodding knowingly amongst ourselves and start telling the real story to to everyone.