Last February, just after the Stimulus Package had been passed; I went to a community meeting in Hartford CT. The subject of the day was the announcement that the city would be investing 2.4 billion dollars into its sewers. More than 200 hundred people, crowded into a church basement to hear about the new opportunities for work. In a city with one of the highest poverty rates in the nation -- despite being the home of America's insurance industry and the state capital of Connecticut -- opportunities for work for most of its citizens are rare.
Instead of hearing about new opportunities for living wage work, they were treated to a long discussion about privatization, subcontracting and this big machine that tunnels underground, sparing the need to dig up the streets. And by extension, saves everyone the cost of hiring people to dig up those streets.
When 2.4 billion dollars yields only 200 jobs at any one time during the 3 year reconstruction effort, that means only about 1% of the budget would be spent on local employment. At a moment when President Obama is about to propose a new jobs package – based on the last model (without the bank bailouts) – it’s instructive to question whether trickle-down economic solutions should be given another chance. Please read on...
Hartford Needs Jobs
Hartford is poor, desperately poor. The median income of the City of Hartford in 2007 – before the hard times hit – was $28,572. Compare that against the median income of the State of Connecticut, which was 65,967, third highest in the nation. Poverty, even by the miserably cheap standards that the United States defines the problem, historically runs over 30% and the greater mass of the population lives just above that line.
Hartford is 25% White, 35% Black and 40% Latino and most of its neighborhoods are poor and/or working poor. The north end is mostly African American and West Indian, its expanding Latino population -- mostly Puerto Rican and Dominican -- dominates the middle of the city. In the lower eastern corner, a small population of working class white population (mostly Irish and Italian) has long maintained residence. At the central western edge of the city, a smaller group of affluent white homes cluster around the state mansion, alongside the amenities befitting the more privileged among us. All the wealth is concentrated in the downtown insurance industry, which exists almost as a walled city-within-a-city, having no effect on the greater mass of Hartford citizens, except to remind them of their poverty. Most state infrastructural investment is in this area. Those that work in state government and the insurance industry traditionally live elsewhere, shop elsewhere and entertain elsewhere, so the economic effects of their paychecks on the local economy are negligible.
The poor, Black population in the Northeast has been suffering with such high levels of multi-generational poverty, many families have never known economic self-sufficiency and unemployment among young black men is usually over 50% in the best of economic times. Their school system consistently performs at the bottom of state assessments and was recently taken over by a private corporation that eliminated college-bound education for most of the high school students, providing mass technical education, instead. In some neighborhoods, the only industry is the drug industry and young men who participate in that trade, follow the predictable cycle of arrest, incarceration and permanent unemployment by the time they are in their early 20's.
This systemically impoverished community poured out in high numbers for Obama in 2008. Those who showed up at this community meeting to hear about sewer construction had the audacity to hope that the first Black President in American history would know what they were going through and that his first act as President would be to address that situation.
Stimulus Spending without the Jobs
A week after the Stimulus Package had been passed in February 2009; I went to a community meeting in Hartford CT. The subject of the day was the announcement that the city would be investing 2.4 billion dollars into its sewers. More than 200 hundred people, most of them African and Latino American men crowded into a church basement to hear about the opportunity to work. In a city with one of the highest poverty rates in the nation -- despite being the home of America's insurance industry and the state capital of Connecticut, opportunities for work for most of its citizens are rare.
Instead of hearing about new opportunities for living wage work, they were treated to a long discussion about contracting, subcontracting and this big machine that tunnels underground, sparing the need to dig up the streets. And by extension, saves everyone the cost of hiring people to dig up those streets.
At the end of the day, they said this project would yield 200 jobs at any one time during the 3 year reconstruction effort. At an average wage of 40,000 dollars a man, the local impact of that project on its job market added up to about 1 percent of the total contract.
That 2.4 billion dollar project would make money for some people, but not for them. Most of it would go to the contractor that owned the drilling machine (we were told there were only two such machines in existence). The state would make some money, though there was no indication that they would hire anyone new. Other subcontractors would make money and some out-of-town workers would come in to do the work. Several subcontractors down the food chain, work for Hartford might arrive. But in the end, only 1% of this investment would reach the streets.
The people who showed up to that meeting expected to be the first to hear about a new WPA project. But they were wrong. Instead, they got a lecture about automation and the privatization of public works projects. The ‘audacity of hope’, indeed.
Public Sector Versus Private Sector Investment
Had the 2.4 billion dollars being spent on sewers been spent directly on employment in a community like Hartford, the impact would have been astounding. Consider this: 2.4 billion spent over 3 years, hiring people for 40,000 dollars a year – plus 20,000 a person set aside for fringe benefits and overhead – would yield 13,333 jobs. In a town with about a 45,000 households and a median income of 28,572, one third of that community would have guaranteed work and the median income of Hartford would have risen dramatically. Many of the permanently unemployed would have living wage work and they would be improving their resumes for future employment. You could even skim off 200 million from that pot and still have enough money to employ 10,000 people for 3 years, with generous fringe and bureaucratic honey pots.
But that is not what happened. The population of Hartford did not get a WPA project. They got a lecture about privatization and automation and 200 jobs, instead of 13,333. The government still spent 2.4 billion and the sewers are being upgraded, but the potential positive economic effect was utterly lost. And everyone in the room who voted for Obama was sorely disappointed.
Trickle-Down Economic Solutions Waste Resources
In the months since I attended this meeting, we have seen this outcome repeated over and over across the nation. As the Atlantic Journal-Constitution pointed out in an editorial recently (12/2/09):
"Once a calculator enters the picture, the rosy scenario collapses. Nationally, the federal government has thus far awarded almost $159 billion under the provisions of the Recovery Act. That works out to almost $248,000 per job saved.
The price tags are even higher in certain regions.
For example, Texas used its stimulus award to create employment at a cost of almost $546,000 per job. Wyoming was even worse at $554,000 a job. The worst offender was the District of Columbia. Thus far it has received $2.8 billion in stimulus awards and has reported that this money led to 2,274 jobs created or saved. That works out to $1.2 million per job."
This is the cost of supply-side, trickle-down economics. What should cost 60,000 – or even 70-80,000 – costs over a half million dollars. This is what happens when you let the private sector become the middleman in the effort to get money to the streets. This is what happens when you let states and municipalities handle the deadly important issue of ensuring people have living wage jobs. The money ends up everywhere but where it’s supposed to be, in the pockets of ordinary Americans and visibly expressed in relevant work done in the public interest.
Stimulus Spending: Second Verse, Same as the First
But so far, all we have heard about from the White House is the same smorgasbord of marginal remedies including transportation and infrastructure money, tax credits for small businesses, incentives for energy saving home improvements and bailouts for the states. This is like buying bunting when you haven’t got the stage to set it on. Unless a WPA project – directly funded out of the federal treasury and paid directly to working people in exchange for their labor – is the centerpiece of a jobs stimulus package, the results of this investment will be exactly the same, the middlemen will pocket the profits, the states will play games with their budgets, the banks will get their debt payments and working people will still be unemployed.
But before President Obama even mentions a word about a second stimulus plan, the White House is making it very clear that they intend to pocket some of the unspent TARP money to pare down the deficit. And of course, they just committed to winning the war in Afghanistan in 18 months, so an unspecified sum of money will be spent there. While the White House estimates 30 billion a year in additional spending on Afghanistan, others estimate 75 billion a year. I suggest the number will be closer to a 100 billion a year. But nobody really knows how much war costs, because the Pentagon can’t balance its books.
Judging from the suggestions leaking out of the White House, Obama wants to solve the job crisis on the cheap and will depend on the private sector to save the day. Indeed, his solutions are -- once again -- based on supply-side economic principles. If this is all he has to offer the 27 million Americans who are desperately looking for a job, that low rumble of anger heard dimly beyond the Beltway babble will grow to a thundering roar.
30 years of trickle-down, free-trade economics has done enormous damage to the lives of most Americans. Their jobs have been downsized, outsourced, converted to temporary and part-time work or otherwise eliminated. Their wages have declined while their cost of living and personal debt has mounted. The privatization schemes that have dominated public policy for the past couple of decades have ballooned federal, state and municipal budgets – and added costs to the personal budgets of the average American – while the services provided have precipitously declined.
All these changes were heralded by both Democrats and Republicans alike as a good thing for America. But it wasn’t. It was a very bad thing, felt by manufacturing workers in the beginning and by engineers, researchers, teachers, accountants and business executives in the end. The declining fortunes of the many were hidden for decades, until the economic crash exposed the whole mess. And it is that whole mess that must be cleaned up, if the Democrats hope to keep their control over the federal government.
Obama Needs New Economic Advisors and Better Ideas
If these ideas are the best Obama's brain trust has to offer 27 million unemployed, underemployed and utterly defeated workers, then he needs new economic advisors. He may need them anyway. This country cannot survive another administration dominated by those who believe trickle-down economics will solve the job crisis or repair our devastated economy. Nor can we afford to be ruled by a class of people that think it’s okay to leave that many people out in the cold and wait for the status-quo economy to return.
If direct federal employment is not a central part of President Obama’s recipe for job growth, towns like Hartford will not return to the polls in 2010, nor will they be so enthusiastic in 2012. They were waiting for the WPA project. They had the audacity to hope that Obama and the Democratic Party would mean a positive change in their fortunes. They got a lecture in supply side economics and automation instead. When you dash the hopes of the desperate, you should best expect anger in return.
The time is running out for Obama to make a positive difference in people’s lives and his actions thus far have shown far more concern for the interests of the banks and the warmongers. His base is getting angry and they want a job. Will Obama step up and become a later-day Franklin Delano Roosevelt? Or will he balance the books on the backs of poor, the working class and the unemployed, while shelling out billions for war and corporate giveaways?
It strikes me that both Obama and the Democratic Party leadership are doing everything they can to avoid the very solution -- a federal jobs program -- that their base expects and that their country needs, no matter how much other solutions cost, waste or fail in the end.
The clock is ticking and hope is trickling away............... fast.