Earth to Obama: Forget the Deficit, and Focus on the Jobs Crisis

Roger Bybee

Service Employees union member janitors rally to protest the decision to close the only unionized Toyota plant in the U.S. and recent layoffs of the unionized cleaning staff at the car-maker's national headquarters, in Torrance, Calif., in September 2009.

Back in January, President Obama’s State of the Union speech contained tell-tale signs of his distance from the suffering of workers caused by corporate globalization and his increasing adoption of the Wall Street worldview of his top economic advisors.

Deplorably, Obama reinforced the false analogy — much beloved by Republicans and Blue Dog Democrats — between a hard-pressed family’s budgeting and the federal government’s fundamentally different responsibility to help such families by spending money to re-start the economy: Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t.” Obama thus undermined the framing” of his own economic stimulus strategy.

Now this same policy direction is coming to full bloom with the administration sacrificing jobs as its top priority and fixating on the federal budget deficit. It’s another spurning of his electoral base.. But as the New Deal showed, government spending is imperative in a severe downturn to restore spending power and create jobs.

As economist Jeff Faux of the Economic Policy Institute pointed out, the federal deficit can be most successfully addressed once unemployment has been significantly brought down and revenue is again flowing into government coffers.

At the same time it has locked on to the budget deficit, the Obama Administration is almost entirely ignoring another deficit that has much more devastating long-term effects: the imbalance between the trickle of US goods being exported and the tidal wave of products flooding the U.S. from Mexico, China and other low-wage nations. The trade deficit hit $40.4 billion in March.


The connection between US trade policy, trade deficits and job loss is no mystery to most Americans.

People can understand that we’re buying more than we’re selling,” stresses Faux. You can admit that the way we’re going to compete is on the basis of low wages or we can adopt an industrial policy to save our productive base.”

Persistent trade deficits have been steadily escalating as US corporations have built more and more plants overseas and relocated substantial chunks of our productive base overseas. As Faux explains in his valuable book The Global Class War,

Under the circumstances of a chronic trade deficit,…the engineered opening of the American economy to more trade through NAFTA [North American Free Trade Agreement] and the WTO [World Trade Organization has been extraordinarily reckless.Each new trade agreement encouraged more imports, provoked more outsourcing, and required more debt.

With these and other negative outcomes from NAFTA and WTO, it is only natural that 77% of Americans oppose off-shoring of jobs and more than 90% want labor and environmental protections in any future trade deals.

But corporate, political, and media elites have a different view: In Washington, the divine right of multinational corporations to have access to the world s cheap labor trumped any concern for the resulting red ink” on trade, writes Faux. The indifference to an out-of-control foreign debt is in striking contrast to the fretting about projection that the Social Security system might have to start borrowing money 40 years from now.”


The soaring foreign trade deficit and the resulting dependence on foreigners buying up U.S. debt prompted billionaire investor Warren Buffett to warn that instead of the ownership society” advocated by President Bush, we were headed instead toward a sharecropper’s society.”

Here’s our situation: unemployment climbing last month to 9.9% and expected to remain at 8% for several more years and foreclosures are projected to rise from 2.8 million in 2009 to 4.5 million in 2010. At this moment, tens of millions of American families have more reason to expect to exist as virtual sharecroppers” than to count on decent-paying jobs, owning a home, and a secure retirement. 


Facing this situation, it remains shocking to learn that the administration has become so smugly confident that the jobs crisis is under control that it has moved on to concluding that the federal deficit now out-ranks job creation. So rather than allocating more funds for expanding public jobs, the Obama administration has adopted the Republican theme that federal spending must be curtailed in order to control the budget deficit.

As Robert Kuttner reports, the Obama administration has moved job creation to the back burner under the assumption that a recovery is well under way. With astonishing obliviousness to the suffering occurring among workers without jobs and families losing their homes, Obama has adopted federal deficit reduction as its new priority.

With a seeming combination of disgust and disbelief, Kuttner states:

Perversely, austerity has become the cure du jour. Top administration officials say there will be no new jobs initiative, because deficit reduction is needed to reassure the bond market. President Obama’s new fiscal commission is expected to recommend cutting services and raising taxes.

Jeff Faux, like Kuttner, views this approach as combining economics borrowed from the Republicans with a suicidal political strategy for the November mid-terms. President Obama is making the unbelievable assertion that trade agreements will reduce trade deficits, when we have 25 years of experience that show it works the other way,” says Faux.

Yet while pursuing policies that promise only unending misery for already-battered industrial communities, Obama and his top aides are unwilling to publicly pronounce their assumptions. No one in the higher party circles is willing to admit what they are thinking, that there’s no future for these places and no future for US manufacturing,” says Faux.

The Democrats’ policy that leaves towns like Janesville hopeless is pushing people to the Right,” he thunders. ” If they think that’s the way that the Democratic Party will stay in power, they are really removed from reality.”

Roger Bybee is a Milwaukee-based freelance writer and University of Illinois visiting professor in Labor Education.Roger’s work has appeared in numerous national publications, including Z magazine, Dollars & Sense, The Progressive, Progressive Populist, Huffington Post, The American Prospect, Yes! and Foreign Policy in Focus.More of his work can be found at zcom​mu​ni​ca​tions​.org/​z​s​p​a​c​e​/​r​o​g​e​r​d​bybee.
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