Tuesday, September 13, 2011

Pres. Obama To Congress: Pass The American Jobs Act Now!

Photo: White House/Chuck Kennedy

President Barack Obama addresses a joint session of Congress on jobs and the economy - video & fact sheet

Open Questions: The American Jobs Act - Join senior White House officials as they field your questions on the American Jobs Act on Thursday, September 15th at 4:00p.m. EDT.
by Beverly Bandler

“We do know how to generate growth and create jobs. As a large and growing body of research shows, we just have to spend money...The economy needs additional stimulus to get back to normal rates of unemployment. The Republicans may block this path, but at least then the public might understand that people are unemployed or underemployed because of a political decision, not an act of God.”
- Economist Dean Baker

“The answer from economics is: There is plenty we can do to create jobs and promote growth.”
- Economist Joseph E. Stiglitz

“The time-honored principle, backed by economists right and left, is that temporary bursts of spending — which usually arise when there’s a war to fight, but can also arise from other causes, including financial crises and natural disasters — are a good reason to run temporary budget deficits. Rather than imposing sharp cuts in other spending or sharply raising taxes, governments can and should spread the burden over time, borrowing now and repaying gradually via a combination of lower spending and higher taxes.”
- Economist Paul Krugman.

“Playing it safe is not going to cut it. Not proposing anything bold and not trying to do something to definitively deal with our problems would mean that we’re going to have another year and a half like the last year and a half...”
- Economist Christina Romer

American Jobs Act

Main Provisions

  1. Tax Cuts to Help America’s Small Businesses Hire and Grow
    • Cut payroll tax in half for 98% of businesses
    • A complete payroll tax holiday for added workers or increased wages
    • Reforms and regulatory reductions to help entrepreneurs and small businesses access capital
  2. Putting Workers Back on the Job While Rebuilding and Modernizing America
    • A “Returning Heroes” hiring tax credit for veterans
    • Preventing up to 280,000 teacher
    • Modernizing at least 35,000 public schools across the country
    • Immediate investments in infrastructure and a bipartisan National Infrastructure Bank
    • A New “Project Rebuild”
    • Expanding access to high-speed wireless
  3. Pathways Back to Work for Americans Looking for Jobs.
    • The most innovative reform to the unemployment insurance program in 40 years
    • A $4,000 tax credit to employers for hiring long-term unemployed workers
    • Prohibiting employers from discriminating against unemployed workers
    • Expanding job opportunities for low-income youth and adults
  4. Tax Relief for Every American Worker and Family
    • Cutting payroll taxes in half for 160 million workers next year
    • Allowing more Americans to refinance their mortgages at today’s near 4 percent interest rates
  5. Fully Paid for as Part of the President’s Long-Term Deficit Reduction Plan

The Republicans have been using their enormous political power and control over the media to try and rewrite U.S. economic history. They have been dominating public debate and attempting to erase from American memory, in what Tony Judt called an “age of forgetting,” the results of the destructive policies of Herbert Hoover’s administration that brought the nation the Great Depression.

Their answer to the national employment crisis is to reintroduce “deficit hawk-ism” in the middle of the worst economic downturn since the Depression. But U.S. economic history contradicts the reincarnated deficit hawks: “Using the austerity formula, then-President Herbert Hoover converted the stock market crash into the Great Depression,” states Joseph E. Stiglitz. [Stiglitz] In the Great Depression, Franklin Roosevelt’s New Deal generated growth and reduced the unemployment rate from 25 percent in 1932 to less than 10 percent in 1937. [Economic Review]

However, the deficit hawks of that era persuaded President Roosevelt to reverse course prematurely and move toward budget balance. The result was a severe recession that caused the economy to contract sharply and sent the unemployment rate soaring. Only the much larger wartime spending of the 1940s produced a full recovery. There were more lessons from the late 1990s: Stiglitz saw “firsthand how the International Monetary Fund’s imposed austerity on East Asian countries converted downturns into recessions and recessions into depression.”

John B. Judis describes today’s economic downturn as one that structurally resembles the depressions of the 1890s and the 1930s rather than the cyclical recessions that have recurred since World War II. [Judis] We have some 25 million Americans who want full-time jobs but can’t get them. The youth unemployment rate is as much a twice that of the already unacceptable national average. An increasingly large fraction of the unemployed, now more than 40 percent, have been out of work for more than six months. [Stiglitz] The Bureau of Labor Statistics reported unemployment as of August 2011: 9.1%.

Let’s look at the deficit issue:

Thinking about the deficit, we need to reflect back 10 years, when the country had such a large surplus at 2 percent of GDP that the Federal Reserve Bank chairman worried we would soon pay off the entire national debt — making the conduct of monetary policy difficult. Knowing how we went from that situation to this helps us think through how to solve the deficit problem.

There have been four major changes: First, tax cuts beyond the country’s ability to afford. Second, two costly wars and soaring military expenditures — contributing roughly $2.5 trillion to our debt. Third, Medicare Part D — and the provision restricting government, the largest drug buyer, from negotiating with pharmaceutical companies, at a cost of hundreds of billions of dollars over 10 years. Fourth, the recession.

Reversing these four policies would quickly put the country on the road of fiscal responsibility.

The single most important thing, however, is putting America back to work: Higher incomes mean higher tax revenues. ~ Joseph E. Stiglitz

Today’s version of the GOP doesn’t fight progressive action with facts or with empirical evidence but with a slavish and even irrational commitment to unsupported ideology and what economists call “flat-earth” or “voodoo” economics.

Our nation’s leaders, states economist Dean Baker, have been “deliberately inflicting enormous pain on tens of millions of people to advance their political agenda.”

He says: “They are using the crisis that was created through their greed and incompetence to reduce hugely valued public benefits, like Social Security and Medicare. And, now they are using the crisis that they have created for state and local governments to destroy public sector unions.” [Baker 02-25] “No serious economist,” Robert Kuttner writes: “believes that more fiscal contraction in an economy on the brink of a second recession will create a recovery.”[Kuttner]

Conservatives like Benjamin Powell of the “libertarian” Independent Institute would have the public believe that: “Government doesn't create jobs that add value to the economy; companies and entrepreneurs do. Through taxes, mandates and regulation the government typically discourages hiring and destroys jobs.” [Powell] Yet he and other conservatives have yet to explain why there was zero net job creation between 2000 and 2009.

No previous decade going back to the 1940s had job growth of less than 20 percent. [Irwin] Further, Americans are paying the smallest share of their income for taxes (all federal, state and local taxes) since 1958 [Cauchon], and just what regulations are left to repeal? Deregulation started in the 1970s with both the Republicans and Democrats participating. The deregulation movement began when President Jimmy Carter signed the Airline Deregulation Act in 1978, a movement that spread inspired by a group of thinkers enamored of the “free-market” economist Milton Friedman.

Their resurrection of laissez-faire political economic theories of the nineteenth century monopolists ignited a de-regulation frenzy eagerly embraced by President Ronald Reagan. Beginning in Reagan’s first term, for example, antitrust enforcement all but ended and by the time Reagan left office, laissez faire had become conventional wisdom. [Lynn] Perhaps the most important regulatory removal: the repeal of Glass-Steagall in 1999. Some economists believe this repeal directly contributed to the severity of the Financial Crisis of 2007-2011 by allowing Wall Street investment banking firms to gamble with their depositors' money that was held in commercial banks owned or created by the investment firms.

One would ask Powell and other conservatives: Just how low do taxes have to go to create jobs? How long do we have to wait for the “free market” to create jobs? How many regulations are left that are inhibiting the “free market” from creating jobs?

Joseph Stiglitz emphasizes that we must dispose of two myths: One is that reducing the deficit will restore the economy; the second is that the 2009 stimulus didn’t work.

The Most Effective Stimulus:

Our current economic problem is insufficient aggregate demand. Only policies that boost the overall demand for goods and services in the economy will significantly lower unemployment in the near-term. Graphic: Josh Bivens, Economic Policy Institute.

Republicans want Americans to believe that the 2009 stimulus, the American Recovery and Reinvestment Act of 2009 (ARRA) was a failure.

There are many voters who concluded that Obama’s stimulus program actually contributed to the rise in unemployment and that cutting public spending would speed a recovery. [Judis] They concluded this because the Republican Party keeps repeating and repeating this false claim. The charge that ARRA was a failure is not only untrue, it is “utter nonsense.”

The right, now the radicalized right Republicans, will try to use this myth or if you prefer, lie, as they fight the American Jobs Act. So, let’s get that story straight. Economists agree that the stimulus worked, but it was just not big enough, and didn’t last long enough to tackle a crisis that was far more severe than was generally understood in late 2008 and early 2009. The footprints of the stimulus bill have been found in just about any area of the economy and the conclusion is ARRA “helped avert a second Depression.” [Blinder & Zandi; Chan]

As soon as President Barack Obama took office in 2009 he requested an economic recovery plan from Congress to combat the dire national economic crisis that he and his administration inherited. (Their one big error, says Stiglitz, was that they “vastly underestimated the severity” of the inherited crisis.”[Stiglitz])

The American Recovery and Reinvestment Act of 2009 (ARRA) was a stimulus measure, estimated at $787 billion at the time of its passage that February and recalculated at $862 billion by the Congressional Budget Office in January 2010. ARRA was designed to jumpstart the economy, to create and save 3.5 million jobs, give 95% of American works a tax cut, and begin to rebuild America’s road, rail, and water infrastructure with an unprecedented accountability.

The rationale for ARRA was based on the macroeconomic theory of John Maynard Keynes, which argues that during recessions the government should offset the decrease in private spending with an increase in public spending in order to save jobs and stop further economic deterioration. Some 200 economists wrote to Congress in early February 2009 in support of the stimulus.

ARRA passed in spite of the nearly total obstructionism of Congressional Republicans: no Republican votes in the House and three in the Senate. The House passed the bill 246-183, along party lines; 176 Republicans and 7 Democrats voted against it. The Senate passed the bill 60-38 with all Democrats and Independents plus three Republicans. ARRA was signed into law February 17, 2009. The Recovery.gov website was created to track this act.

In early July of 2009, Capitol Hill Republicans were already claiming ARRA a “dismal failure.” [Perr] While the unemployment of 9.7% remained stubborn that month, it was estimated that one million jobs had already been created or preserved [Perr]; the stimulus was already having a dramatic impact in warding off the calamity in the states affected by a sharp drop in tax collections [Cauchon] and the Gross Domestic Product (GDP) had stopped its calamitous decline.

Even the reliably Republican Wall Street Journal agreed in early September 2009 that the stimulus had helped stem the recession bleeding and the chief U.S. economist for Goldman Sachs & Co. predicted that without the extra stimulus, the U.S. economy would be somewhere around zero instead of the predicted 3.3% growth. [Perr] While ARRA did not bring the Great Recession to a a final end by July 2010 [Blinder & Zandi], their conclusion that direct intervention by the government to stabilize the economy “helped avert a second Depression” was empirically supported. [Chan] Unemployment had peaked at 10 percent, and today is still more than 9 percent, but it represents a drop and Stiglitz writes: “Without the stimulus…unemployment would have peaked at more than 12 percent.” [Stiglitz]

It is interesting that the House Republicans who voted against ARRA sought and took credit for ARRA programs in their respective districts. They voted against the stimulus and then asked President Obama for money. The Democratic Congressional Campaign Committee [DCCC] established a "Hypocrisy Hall of Fame" to list these Republican Representatives. As of September 2011, the DCCC listed 128 House Republicans in this category.


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Contact Congress: http://www.contactingthecongress.org

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