Robert Reich: The Zero Economy

by on September 3, 2011 · 5 comments

in Civil Rights, Popular

By Robert Reich / Robert Reich’s Blog / Sept 3, 2011

The Bureau of Labor Statistics reports today no jobs were created in August. Zero. Nada.

Well, not quite. The strike at Verizon reduced the labor force by 45,000. Minnesota government employees returned to work, adding 22,000. So in reality, America added 23,000 jobs. Almost zero.

In reality, worse than zero. We need 125,000 a month merely to keep up with population growth. So the hole continues to deepen.

Since this Depression began at the end of 2007, America’s potential labor force – working-age people who want jobs – has grown by over 7 million. But since then the number of Americans with jobs has shrunk by more than 300,000.

If this doesn’t prompt President Obama to unveil a bold jobs plan next Thursday, I don’t know what will.

The problem is on the demand side. Consumers (whose spending is 70 percent of the economy) can’t boost the economy on their own. They’re still too burdened by debt, especially on homes that are worth less than their mortgages. Their jobs are disappearinig, their pay is dropping, their medical bills are soaring.

 

And businesses won’t hire without more sales.

So we’re in a vicious cycle.

Republicans continue to claim businesses aren’t hiring because they’re uncertain about regulatory costs. Or they can’t find the skilled workers they need.

Baloney. If these were the reasons businesses weren’t hiring – and demand were growing – you’d expect companies to make more use of their current employees. The length of the average workweek would be increasing.

But the length of the average workweek has been dropping. In August it declined for the third month in a row, to 34.2 hours. That’s back to where it was at the start of the year – barely longer than what it was at its shortest point two years ago (33.7 hours in June 2009).

It’s demand, stupid.

So what does a sane nation do when the consumers and businesses can’t boost the economy on their own?

Government becomes the purchaser of last resort. It hires directly (a new WPA and Civilian Conservation Corps, for example). It helps states and locales, so they don’t have to continue to slash payrolls and public services. (The help could be structured as a loan, to be repaid when unemployment drops to, say, 6 percent.)

And it hires indirectly – contracting with companies to rebuild our crumbling infrastructure, including school buildings, to take another example.

Not only does this create jobs but also puts money in the hands of all the people who get the jobs, so they can turn around and buy the goods and services they need – generating more jobs.

Get it? Not exactly rocket science.

So why don’t Republicans get it? Either they’re knaves – they want the economy to stay awful through next Election Day so Obama gets the boot. Or they’re fools – they’ve bought the lie that reducing the deficit now creates more jobs.

Every time you hear anyone say we’re “broke” or “can’t afford to spend more,” tell them we’ll be in worse shape if we don’t. If the economy remains dead in the water, the ratio of public debt to GDP balloons.

And remind them that the federal government can now borrow at fire-sale rates. Interest on the ten-year Treasury bill is 2 percent.

Do you hear me, Mr. President? Please – be bold next week. And if, as expected, Republicans refuse to go along, take it to the people. Mobilize the public. Use the bully pulpit. That’s what you have it for.

One more thing, Mr. President. You also have to tackle inequality. When so much income and wealth continues to flow to the very top, America’s vast middle class still won’t have enough purchasing power to boost the economy. Priming the pump is necessary but won’t be sufficient without enough water in the well.

┬áRobert Reich is Chancellor’s Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including “The Work of Nations,” “Locked in the Cabinet,” “Supercapitalism” and his latest book, “AFTERSHOCK: The Next Economy and America’s Future.”

{ 5 comments… read them below or add one }

avatar RB September 4, 2011 at 8:19 am

Three years of public spending, of growing government, of increasing regulation, of increasing deficits, of Keynesian economics has yielded NO JOBS IN AUGUST and 1%GDP growth.

“Insanity: doing the same thing over and over again and expecting different results.”
Albert Einstein

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avatar Frank Gormlie September 4, 2011 at 9:36 am

RB – do you know you just quoted a socialist? Albert Einstein

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avatar Ellis Goldberg September 4, 2011 at 1:31 pm

3 years of Keynesian prescription taken in too weak doses does not cure 30 years of Freidman’s Reaganomics trickle down bullshit.

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avatar Colorado Leo September 4, 2011 at 8:08 pm

Amen, Ellis. Keynesian economics worked during the Great Depression. And we’ve already seen the Supply-side economics practiced by Bush drove the economy (and the National debt) off the cliff…

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avatar debisis September 5, 2011 at 2:25 pm

(modified by commenter)
God Damn it, RR, it’s the Wages. Stupid. Then it’s the demand. Stupid. Do you not understand in your almost 40 years of being an economist REALIZE that there are so many college educated youngsters and aging college grads who are stuck in the service industry who are just waiting for higher wages so they can spend more thier money(after having to pay rent and basic needs and stuff) to help boost our economy. We need demand, sure. We need higher wages NOW. After all, the young hipsters REALLY love to spend on apparell and other crap….all the while d heads like YOU try to (pretend) to figure out what types of jobs should be immersed in our country along with bragging about it being “Demand, Stupid”. No, Mr. Reich, you are stupid for the past forty some odd years… while all of a sudden picking your tiny little ass and your brain on how to ensure a higher income for yourself come up this epiphany to write yet another boring “NO Shit, Sherlock” book and tell us in a 2.15 min vid about your sarcastic opinion of the state of our economy. You know what, I’m glad you were born SHORT! Aren’t you supposed to be smarter than this for a short guy?? Should you not have known about all of this soon after the seventies? I’m a liberal and I hate hypocrites like YOU. I hope your next books forces you to have pay your publisher back!

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