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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.

Atlantic Journal-Constitution

Originally posted to Tom Taaffe on Mon Dec 07, 2009 at 11:11 AM PST.

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Comment Preferences

    •  Do u really think gvt will create all jobs? (0+ / 0-)

      GOP don't lose. They ACORN.

      by The Simple Canadian on Mon Dec 07, 2009 at 11:38:21 AM PST

      [ Parent ]

    •  you want (2+ / 0-)
      Recommended by:
      Maimonides, sulthernao

      the federal govt to hire 20,000 workers to dig those sewer trenches with shovels,instead of using modern technology, I presume...or you do not want to upgrade the sewage system?

      You actually think that the feds should hire 27 million people to work projects by using 1930 implements?

      •  I used the moment to make a point (3+ / 0-)

        I said the money in the project could pay for 13,333 workers, not 20,000. That was an economic point, not technical advice. I didn't say they could all pick up a shovel and start digging. I don't know how many people it would take to do the work 'the 1930's way', but certainly those who weren't needed for the digging could do other, unrelated work.

        The point was that the stimulus package fed the guy who owns the drilling tools, but it didn't help the people who needed jobs. And that was the selling point for funding the guy who owns the drill.

        And sometimes, new technology is not better than doing it 'the old way'. Do you think that talking to a computer when you try to contact a corporation is an improvement over a live human being? Or that a course taught by a computer program -- or a teacher sitting at a computer -- is an improvement over classroom education? I don't think so.

  •  $200 Billion jobs bill coming (4+ / 0-)

    from the rec list

    rec list

    Let's remember that we should care about people even after they're born. - A. Grayson

    by IL JimP on Mon Dec 07, 2009 at 11:18:50 AM PST

    •  yeah, but what's it being spent on? (2+ / 0-)
      Recommended by:
      Brooke In Seattle, Wheever
      Missing from this proposal -- at least at this point -- is a federal jobs program. Its got tax credits for small businesses, infrastructure and transportation money, more bailouts for the state (without addressing the underlying problems that produce those budget crises) and a little more money for green investments. It's the last proposal, done on the cheap, minus the bank bailouts and without using up all of the available TARP money.
      •  We'll have to wait until tomorrow (3+ / 0-)
        Recommended by:
        Maimonides, Diogenes2008, sulthernao

        to see what he proposes.  $200 Billion is a lot of money though, we'll just have to see what the President has to say.

        Let's remember that we should care about people even after they're born. - A. Grayson

        by IL JimP on Mon Dec 07, 2009 at 11:31:17 AM PST

        [ Parent ]

        •  Indeed, (1+ / 0-)
          Recommended by:
          Brooke In Seattle

          but the early reports aren't very good. If a big jobs program were coming down the pike, you'd see the advance men out there softening up the audience for the big pitch. Instead all the buzz is about tax credits and small business grants. Yet another round of trickle-down economic solutions. A federal jobs program is -- thus far -- notable by its absence.

    •  I'll believe (1+ / 0-)
      Recommended by:
      Brooke In Seattle

      it's not more money for the wealthy in some oblique fashion when I see it. (See my comment below.)

      "'club America salutes you' says the girl on the door/we accept all major lies, we love any kind of war"--The Cure, "Club America"

      by Wheever on Mon Dec 07, 2009 at 11:33:46 AM PST

      [ Parent ]

  •  Read this: Grad student paying for Duke (0+ / 0-)

    Univ. grad school, living in a van on campus.

    http://www.salon.com/...

  •  Excellent post... (2+ / 0-)
    Recommended by:
    Brooke In Seattle, greengemini

    ...could use a little clean-up in the first half (some redundant paragraphs); but, overall, a great job.

    Especially like this 'graph...

    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.

    "I always thought if you worked hard enough and tried hard enough, things would work out. I was wrong." --Katharine Graham

    by bobswern on Mon Dec 07, 2009 at 11:26:10 AM PST

  •  At the very least the stimulus should have (3+ / 0-)
    Recommended by:
    greengemini, allergywoman, Tom Taaffe

    included a strong "Buy American" clause. We couldn't even get that passed. To many in congress, even money to be spent on these needed "shovel ready" projects was questioned.

    China initiated a stimulus roughly the same size as ours, and guess what? All the money spent is to go to Chinese corporations in their efforts strengthen its infrastructure.

    I wish that we could get somewhere near your proposal, but it's just a little too common sense for our leaders to get a grip on.

  •   I predict: (3+ / 0-)
    Recommended by:
    Brooke In Seattle, debedb, Tom Taaffe

    In this "jobs bill," "small businesses" will mean big-ass corporations including banks and other financial institutions, oil companies, and federal contractors that are already nursing at the federal teat.

    I have given up hoping that the Obama administration and the Dem congress actually has our backs. They are just further tools of the plutocracy.

    Our "HCR" will be TARP for insurance interests; our "jobs bill" will be TARP for other business interests. Straight from our (empty) pockets to the bank accounts of the wealthiest.

    Perhaps, after all this, minimum wage jobs will be available to help these wealthiest carry their gobs of cash and treasure offshore? Lord knows it would be long-term employment.

    "'club America salutes you' says the girl on the door/we accept all major lies, we love any kind of war"--The Cure, "Club America"

    by Wheever on Mon Dec 07, 2009 at 11:37:50 AM PST

  •  Actually, what Obama needs is a House and (4+ / 0-)
    Recommended by:
    debedb, Hirodog, Nedsdag, LeanneB

    Senate with no Republicans and Blue Dogs. Until that happens, he is going to have to continue to compromise.

  •  Did a bubble just pop, or not? (1+ / 0-)
    Recommended by:
    sulthernao

    There seems to be two conflicting narratives at work:

    1. We have just come out of a bubble of unsustainable debt-driven demand, and expect the economy will subside to a lower equilibrium.
    1. We need to stimulate the economy to maintain near-bubble levels of employment.

    As I see it, the problem with #2 is that it is unsustainable, and in fact invites another crash equivalent to the first. Of course the problem with #1 is that it leaves tens of millions out of work. The problem isn't so much top-down versus bottom-up economics (although I agree top-down is inferior) as a decision on whether and how we adjust to new levels of the economy.

    We've never really had that debate. In fact, some of Krugman's estimates of required stimulus (in the 2T range) assumed that we would be propping the bubble up, as in maintaining pre-crash levels of employment.

    "Karl Rove giving Dems advice is the DEFINITION of 'Concern Troll'" - punkdavid

    by Darkmoth on Mon Dec 07, 2009 at 11:53:14 AM PST

    •  Right on both counts... (2+ / 0-)
      Recommended by:
      greengemini, Darkmoth

      Yes, the debt and commodity-driven economy has crashed. It was made worse by pushing all manner of capital and assets -- including retirement and public assets -- into the marketplace, where all our economic eggs broke at once. And its effects made more profound by the lack of sufficient social safety net to address the economy in dark times (Thank you Bill Clinton for that one!).

      And yes, that economic system is unsustainable for many reasons, not the least of which is the impact of overproduction and consumption on the environment and finite resources.

      This could be the moment to address these problems, by employing the unemployed for work long neglected and to restructure our economy along more sustainable lines (not the least of which is rebuilding that social safety net). You can't leave 15-20% of the population out in the cold, that's how revolutions (good, bad and ugly) get started.

      So how do you solve all problems without repeating your errors? Expand public sector employment, restructure markets to encourage domestic job growth, police the private sector heavily so they don't subvert the long-term goals and pay for it either out of taxes or -- if we were to choose the Latin American model -- by nationalizing public resources and using the profits for the public good.

      You can't finance all that while cutting taxes and waging multiple wars. But then that was probably why Republicans cut taxes and start wars; by bankrupting the treasury, you prevent the state from being able to make significant domestic investment or properly its people against greedy corporations.

      •  Your plan (0+ / 0-)

        is certainly logical and coherent. I'd go so far as to say it's insightful. Unfortunately I'm not sure we have a theory of economics which can guide us in restructuring entire economies to suit. We'd be trying to take our evolved, organic system and engineer it into something artificial but superior. I don't know who I'd trust not to screw that up.

        Frankly, I think it would be simpler and more efficient just to give people a living wage, and remove the requirement of employment as a necessity of survival.

        "Karl Rove giving Dems advice is the DEFINITION of 'Concern Troll'" - punkdavid

        by Darkmoth on Mon Dec 07, 2009 at 01:11:51 PM PST

        [ Parent ]

  •  This diary would be better (4+ / 0-)

    if the diarist actually knew what supply side economics is.

  •  34,000 New Jobs (0+ / 0-)

    in Afghanistan just created by Obama.

    Some people in Hartford, Connecticut are doing wonderfully well financially -- insurance executives.  Maybe their obscene pay will "trickle down" to the poor.

  •  We're all peasants. I'm under no delusion.n/t (2+ / 0-)
    Recommended by:
    Brooke In Seattle, greengemini
  •  Bullshit. (0+ / 0-)

    The article you cite, from the Atlanta-Journal Constitution, was written by Robert P. Murphy, "a senior fellow in Business and Economic Studies at the California-based Pacific Research Institute." The Pacific Research Institute is "a think tank founded in 1979 whose stated vision is the promotion of "the principles of individual freedom and personal responsibility. The Institute believes these principles are best encouraged through policies that emphasize a free economy, private initiative, and limited government". The think tank " has associated with other think-tanks like the American Enterprise Institute and the Cato Institute."

    In other words, this is a columnist with an agenda. If anything it demonstrates how even extremely conservative economic thinking has become the conventional wisdom.

    Now may be the time to revisit an old adage: there are three kinds of lies: lies, damned lies, and statistics. In fact, a few reasonable tweaks can illustrate how manipulation of statistics could change the picture.

    1. If you were to create a job paying $50,000 over 3 years, the total basic salary is $150,000. With overhead and benefits, this easily rises to $75,000x3 = $225,000.
    1. The article points out that $159 billion is funds awarded not funds received. Only $37 billion has been received.
    1. The CBO estimates that 600,000-1.6 million people are working today who would not be working without the Recovery Act. The midpoint estimate is 1.1 million.
    1. If we take the $37 billion funds received and divide it by 1.1 million, the total cost per job comes out to $33,000. Look, I can make statistics look good for "my argument" too!

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