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Back toward double dip

Robert Reich, professor of public policy | June 3, 2011

The May jobs report is a disaster — the weakest reading since September. Non-farm payrolls grew only 54,000 last month, according to the Labor Department’s Bureau of Labor Statistics. Private employment rose only 83,000 — the smallest growth since last June. Government payrolls dropped 29,000.

The overall jobless rate rose to 9.1 percent.

Together with plummeting housing prices, falling wages for non-supervisory workers, a paltry 1.8 percent growth in the first quarter, and a precipitous drop in consumer confidence, the picture should be clear to anyone able to see clearly.

The recovery has stalled.

We’re not in a double dip yet, but the odds are increasing.

The question is whether all this will wake up Washington, and stop the monumental distraction of the games being played over the debt ceiling and long-term budget deficit. The Republican lie that the nation’s long-term budget deficit is responsible for high unemployment would be laughable if it weren’t so tragically irrelevant to the current situation.

The President cannot be reelected if the economy tanks. He may not even be reelected on an anemic recovery in which unemployment remains nearly this high. But all incumbents are endangered. Republican House members from swing districts are toast if they don’t show voters they’re actively working on the twin problems of jobs and wages.

Several steps need to be taken right away. Exempt the first $20,000 of income from payroll taxes for two years. Lend money to cash-starved state and local governments. Initiate a new WPA for the long-term unemployed. Amend bankruptcy laws to allow homeowners to include their prime residencies in personal bankruptcy (giving them more bargaining leverage with their lenders to renegotiate mortgage loans).

Above all: Washington needs to show Americans it’s taking seriously the ferocious problem of jobs and wages, and the trend back toward a double dip.

Cross-posted from Robert Reich’s blog.

Comments to “Back toward double dip

  1. They call it democracy. But we do not have choice to elect the person who stands for election. Its always the people how suffers. – Non Woven

  2. I am an independent (not Red or Blue) but I happen to agree with Professor Reich (and many other economists for the record) on job creation. When a house is burning, it is not the time to conserve water. Yet, that is precisely what we are pushed to believe it is the best thing to do: cuts upon cuts while the economy is critically ill, (even facing the increasing likelihood of a double dip) and job growth is anemic. It certainly will not save the house by cutting the water supply (both privately and publicly) to the fire trucks. Some would argue, sure let the house burn to the ground because we need the water in the future and we can’t always count on future rainfall. The consequences of such logic will be more certain than future rainfall: many will suffer and be left out in the cold without shelter and protection.

    Yes, I understand, for I am not naive, that a political climate has been festering in place to make it nearly impossible to push for any spending, even if it has good investment and job growth values.

    However, I must insist that since we are at war against terrorism for over a decade, we need to spend more (invest more) on the military and our troops. It is the right thing to do and I dare those who oppose it. We need to invest much more in manufacturing and building smart weapons here in the US, expend healthcare services for all military personnel (hire more healthcare workers in the VA, build more VA hospitals across the States…), expend GI benefits in education and retraining (hire more teachers, counselors… to meet the educational and skill development needs of active and inactive GIs).

    Yes, to boldly invest in military manufacturing, healthcare, and education will require taxes and borrowing. Since we have for years avoided to sacrifice and pay for the war on terror, it is time to make that belated commitment and in turn promoting economic growth and job creation with the initial sparks and fire powers from our patriotic and economic pledges to the military.

  3. Hi Robert,
    Thanks for your observations. I’ve enjoyed your classes and wanted to chime in on what I’m seeing in our CA housing market. I’ve worked in wholesale lending for the last 10 yrs the the Marin/SF/Penisula. Its clear there are many business interests that want all of us to believe theat the housing economy is recovering and we should return to the old “buy a house now” mentality that is so pervasive. While I see bargains out there in the housing market I’m also seeing some clients shortlsale or busy in foreclosure processes for their properties purchased in 2008 or 2009. Like today, those borrowers were under the impression they were grabbing great deals, but they failed to forsee the unique set of circumstance that is still playing out in our domestic and global economy. I would argue that folks buying now (2011) can also expect a decline in the value of their purchase over the coming years. I wouldn’t be surprised if some of the folks buying now with only 10% or 20% down are shortselling their properties in 2014 due to being underwater on the amount owed -as that is exactly what happened between 2008 and 2011. We’re in historic times economically and I think it wise for American’s not to expect the economy to “bounce back” as has been the precedent since WW2 with our housing econonomy and the economy at large.

    My two bits
    Kind Regards,
    -Daniel Fahres

  4. Without some real innovation in our country, we will not win this economic bout. We must completely revamp how we see and use the institution of education. If we focus on making our kids smarter and more able, our economic system will naturally expand. Are we out of new industry? Can we not, think of anything else?
    I do agree that the national debt is much of a dark cloud over any economic progress. It’s presence makes overseas investors and domestic money-men scared of exactly what dark place a nation covered in debt can go.
    Still, lets keep our hands off Obama. If he had not acted swiftly to save banks, homeowners, and the automotive industry alike, we would be discussing how to get out of much deeper water.

  5. Robert, previously I asked if you wanted to take a leadership role in Washington fixing the “ferocious problem of jobs and wage” that appears to be as great a problem as America has ever faced, except for problems involving war that is.

    The Good News is that America is still the “Land of Opportunity,” but our politicians are acting like chimpanzees that never evolved, turning Congress into a new version of Washington Zoo.

    However, it also appears that a root cause of America’s political failures may very well be that America’s intellectuals who were supposed to teach and lead us up the path of evolution have also failed to evolve to make themselves capable of producing that leadership.

    So I’ll rephrase my question to you, are you ready, willing and evolved enough to go to Washington and fix the problems?

  6. Agree to a point esp w/r to the deficit not being the major concern over the next year but we can’t loan money to states that refuse to get their financial house in order. Cali is just one several in this regard. I think everyone needs to be asking the question about what specific investments are likely to provide for synergistic job growth in several parts of the economy. Alt energy is just one such area, I believe. So we should lend money as an investment in future growth but not in paying off old promises we can’t afford to keep.

  7. It is a disaster! I totally agree on remodeling the home-mortgage problem. It is a consistent and real problem and it needs to be taken care.

  8. Professor Reich,

    While there are not many things we agree on, I believe you are spot-on with your list of steps that can be taken immediately. I do however believe that our debt load is causing a significant stress to the system and should be reduced.

    I would like to see government create barriers to off-shoring American jobs and incentives to companies that manufacture in America. I am confused by the Obama administrations barriers to US manufacture (You can’t move your factory to South Carolina?). What’s up with that?

  9. The largest “stimulus”, both absolutely and as a fraction of GDP, in the history of the world has apparently failed to work. So Prof. Reich suggests doing even more of the same.

    What’s that popular culture definition of insanity? “Continuing to do the same thing and expecting a different result”?


  10. I sure hope that someone in Washington can provide the leadership to implement recommendations like yours Robert, but it appears that Congress is full of Tories who want to prevent democracy.

    We The People need some new Founding Fathers.

    Want to apply for the job Robert?

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