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Working In These Times

Friday, Feb 26, 2010, 3:14 pm

As Congress Stiffs Jobless, Deficit Hawk, Liberal Economist Plead: Create Jobs Now!

BY Art Levine

With the Congress delaying on extending unemployment insurance and only  taking half-measures to address high unemployment that could last for years, an important new article co-authored by a liberal economist and a conservative deficit hawk explodes myths governing Washington's approach to deficits and jobs.

 Has hell actually  frozen over already?  Maybe so, because the economic crisis is so bad that Lawrence Mishel, the president of the left-leaning Economic Policy Institute and David Walker, the president and CEO of the hard-line deficit reduction organization, the Peter G. Petersen Foundation, have collaborated on an important piece for Politico contending that it's vital to first create jobs  in an economic downturn while ultimately seeking long-term deficit reduction.

As they argue, "A focus on jobs now is consistent with addressing our deficit problems ahead." Their call for action couldn't come at a more urgent time because, as Isaiah Poole of the Campign for America's Future points out, "The latest bit of obstruction being staged by a Senate conservative, done in the name of limiting federal spending, is going to end up costing cash-strapped states millions of dollars as well as potentially causing millions of workers to lose their unemployment benefits."

So the need to move first on jobs, then work on cutting down on deficits later, couldn't be more timely, since misguided myths about deficit spending seem to drive both media coverage and policy-making in Washington.

As Mishel and Walker contend:

The difficulty is that many politicians and news organizations often cast deficit debates as a dichotomy: You either care about them or you don’t.

But this is rarely accurate. The fact that the two of us, who have philosophical differences on the proper role of government, find much to agree on about deficits is a testament to the importance of dropping this useless dichotomy and finally talking about deficits in a reasonable way.

As in every economic downturn, federal revenues have fallen steeply because individuals and corporations earn less in a recession. High unemployment also results in higher expenditures for safety net programs, like Medicaid, unemployment benefits and food stamps.

Not surprisingly then, a huge recession can yield a huge deficit. Efforts to put people back to work and help restore the economy, like the recovery package passed last February, can also increase short-term deficits.

Though a concern, most of the recent short-term rise in the deficit is understandable. Furthermore, public spending can help compensate for the fall in private spending, and help stem the pain of substantial job losses.

With more than a fifth of the work force expected to be unemployed or underemployed in 2010, there is an economic and a moral imperative to take action. Persistently high unemployment drives poverty up, makes it harder for families to find decent housing, increases family stress and, ultimately, harms children’s educational achievement. For young workers entering the workforce, the current jobs crisis reduces the amount they will earn over their lifetime.

Meanwhile, the Senate has passed such a limited $15 billion jobs bill that  it does relatively little to create new jobs and potentially dooms the Democratic Party. In fact, progressive experts and unions argue,a $400 billion jobs package over several years is what's actually needed to make up the nearly 11 million jobs lost in the recession -- instead of the 200,000, at best, the new  relatively tiny Senate bill might create. Meanwhile, by omitting extending unemployment and COBRA from this modest bill in order to be worked on later, it left stranded millions of Amreicans  without extended unemployment benefits and at the mercy of partisan politics in Congress. As Poole noted on Friday:

Sen. Jim Bunning, R-Ky., earlier today continued his blockage of an extension of federal unemployment insurance benefits that are due to expire this weekend. Meanwhile, the Senate has adjourned until Monday, with no votes scheduled until Tuesday.

That means that states will now start cutting off payments to people receiving federally funded extended unemployment benefits, paid to people who have exhausted their standard 26 weeks of unemployment benefits. A total of about 5 million people depend on those benefits today. They won't all be cut off at once, but several hundred thousand stand to lose benefits effective this weekend, according to the National Association of State Workforce Agencies—the trade group for state unemployment offices—and that number will grow each week that Bunning and his conservative allies in the Senate succeed in blocking action on a benefit extension.

Unemployed people will also lose a $25-a-week add-on to their unemployment checks that was authorized under the American Recovery and Reinvestment Act stimulus bill.

The human cost is obvious: People who have been searching for work unsuccessfully for six months or more are suddenly going to lose their only means of income. And that's going to be a lot of people in a state like Bunning's Kentucky, where the unemployment rate is 10.7 percent, compared to 9.7 percent nationally. Nationally, 6.3 million people have been out of work for more than 27 weeks, according to the Bureau of Labor Statistics.

But there are significant costs to cash-strapped states, which are going to have to start sending out notices Monday to many of the people who will lose eligibility under these programs. The National Association of State Workforce Agencies doesn't have a solid estimate on those administrative costs, but "it's certainly millions," said spokesman Ben Fendler, and "the magnitude of the problem will increase significantly if the programs are not reenacted immediately," because new people will lose their eligibility for extended benefits at the rate of 150,000 a week.

There is an ignominious bit of history here, according to Judy Conti at the National Employment Law Project:

"For the first time since the enactment of the unemployment insurance system during the Great Depression, there will be no federal extensions when the unemployment rate was above 8 percent. This is a catastrophe and tragedy of epic proportion. While a debate and discussion about the deficit may be an appropriate exercise for the Senate, it should not be done at the expense of 1.2 million unemployed workers, especially when, as Mr. Bunning admitted on the floor, he knows he will lose the debate and he knows that these benefits are likely to be extended sooner rather than later."

Misguided deficit hawks, like Sen. Bunning, don't seem to understand that starving workers of their unemployment benefits doesn't actually address the deficit problem, but in fact can exacerbate it because of higher costs to taxpayers resulting from emergency social spending. And extending unemployment benefits actually produces among the most bang for the buck in job creation and added revenues from a recovering economy. Mishel and Walker point out:

That’s why we agree that job creation must be a short-term priority. Job creation plans must be targeted so we can get the greatest return on investment. They must be timely, creating jobs this year and next. And they must be big enough to substantially fill the enormous jobs hole we’re in. They must also be temporary — affecting the deficit only in the next couple of years, without exacerbating our large and growing structural deficits in later years.

Funding key investment and infrastructure projects to promote economic growth and offering a job creation tax credit are among the policy ideas that meet all these standards. In addition, temporarily renewing extended unemployment benefits can lead to more jobs throughout the economy.

These experts go on to say:

The Congressional Budget Office projects that after the economy has returned to full employment, spending will still substantially outstrip revenues. Over time, Medicare and Medicaid will be the key drivers of these structural deficits. This is primarily because these programs’ costs tend to mirror overall cost increases for health care, which have risen much faster than overall economic growth for decades, but also because of demographic changes.

Our nation's fiscal picture will darken further with the passage of time, especially if interest rates increase.

These structural deficits are too substantial to close the gap without addressing both sides of the ledger: spending and revenues.

In doing so, it is important to distinguish critical and effective programs and tax policies from outdated and ineffective ones.

We must be careful to maintain the type of public investments that can help fuel broad-based economic growth while strengthening the safety net for our most vulnerable populations. And we should take into account growing retirement insecurity as employer pension systems erode and personal savings falter.

People should be able to count on government benefits they are promised. It is, therefore, critical that federal benefit and funding levels be reconciled.

That intelligent approach to deficits is a far cry from the short-sighted politial stunts of Sen. bunning and his like-minded GOP colleagues that take direct aim at state revenues and the lives of millions of deserving unemployed workers.

Poole writes about this fiasco with a steely rage:

The real shame is that in the face of what is certainly an emergency for people who are about to lose their ability to pay their housing bill or buy groceries, the Senate leadership decided to adjourn for the weekend rather than force a showdown on this issue. David Waldman at Daily Kos was justifiably furious:

"A one-man filibuster is the kind a concerted effort to "make them filibuster" is most likely to break. But instead, no one's even trying anymore. ... the Senate appears to have adjourned for the weekend. Bunning has won for the day, and [Sen. Richard] Durbin's threat [to force regular votes on a motion to break the filibuster] has shockingly failed to materialize at all. The extent of Bunning's punishment: he missed prime time TeeVee last night."

The political failures have all too real consequences, as Poole says:

What a way to reinforce the narrative that Washington can't get anything done and is tone deaf to the needs of working people. But let's not lose sight of the fundamental issue: Senate conservatives would rather see Bunning grandstand over federal spending, even if that grandstanding results in more taxpayer spending and more human suffering, than casting a simple vote in favor of a measure even Bunning says he does not oppose.

It's obstruction for the sake of obstruction, and the rage that will build among unemployed people whose lifelines will begin to be cut this weekend should be directed first at Bunning and the Party of No.

UPDATE:

The True Majority progressive group has launched an email campaign to pressure the Senate to move on the unemployment legislation in order to help 1.2 million families:

2 Senators vs 1.2 million families

 

Unless the Senate acts by Monday 1.2 million families will lose their unemployment insurance.

But two Republican Senators are blocking a vote to extend these essential benefits unless their pet projects get enacted.

Today is our last chance to break the logjam. Tell Senators Bunning and Kyl to stop bickering, and let the Senate vote NOW to extend unemployment insurance.

Art Levine, a contributing editor of The Washington Monthly, has written for Mother Jones, The American Prospect, The New Republic, The Atlantic, Slate.com, Salon.com and numerous other publications.

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