With tens of millions of Americans unemployed the White House, along with Republicans and some conservative Democrats have decided to focus on the deficit while millions of Americans struggle to survive and millions more fear that they are about to lose their jobs as well.
White House Chief of Staff, David Axelrod, was recently quoted in a HuffPo article saying the following;
Today, a new band of Mayberry Machiavellis has gained control, counseling President Obama to ignore the advice of his economic team and press forward with deficit reduction ahead of job creation.
Senior White House adviser David Axelrod told the New York Times recently that "it's my job to report what the public mood is." The public mood, said Axelrod, is anti-spending and anti-deficit and so the smart politics is to alleviate those concerns. "I've made the point that as a matter of policy and a matter of politics that we need to focus on this, and the president certainly agrees with that," said Axelrod of the deficit hawkery that the administration has engaged in over the last several months.
It's an odd political strategy because Axelrod knows that if it succeeds, it will be both bad policy and bad politics. He said as much when asked about the pressure from economic advisers to focus on stimulus and job creation. "I'm very much allied with the economic group, because even as a political matter it would be very shortsighted to take steps that would send us backward," he said.[1]
If the White House believes that focusing on a deficit reduction program is the proper course they are wrong. It can't be more important than getting Americans back to work or providing an unemployment safety net for millions of voters who lost their jobs through no fault of their own.
If they think going into the mid terms with near double digit unemployment, and for some no extended benefits, is a winning strategy then they have loss touch with reality.
Even Chief Moody economist, Mark Zandi, who also served as an adviser to John McCain in his bid for the White House in 2008, does not agree with Axelrod and thinks that the extension of unemployment benefits is more important than deficit reduction in the short term;
Zandi on the importance of passing emergency unemployment insurance benefits:
Let me begin by saying it would be a significant error if Congress did not extend emergency unemployment insurance benefits. The principle reason is that the economic recovery remains very fragile, you could get a sense of that in today’s jobs numbers. The job market is measurably improved from where it was a year ago, and at the beginning of this year. The economy is creating jobs. But it’s not sufficient, certainly not sufficient to bring down the unemployment rate, and as long as it remains near double digits the risks to the recovery remain significant.
Not providing UI would hurt recovery at this critical juncture. There’s two key conduits through which this could occur. The first is the loss of income. The emergency unemployment insurance [benefits are] providing $8 or 9 billion in income to very stressed households, who turn around and spend that money very quickly ... They would have to pull back on their spending and [that will] exacerbate the problems businesses are facing ... The other conduit which is more difficult to gauge ... is the impact this can have on confidence. Consumer sentiment clearly is very shaky. We saw that with the Conference Board survey numbers. Consumers are very, very nervous. And I think with so many people potentially running out of benefits, that could undermine this fragile confidence, which would have a broader impact.
Zandi on the chance of a double-dip:
The odds that the economy will slip back into recession are still well below even. But if Congress is unable to provide this help, those odds will rise and become uncomfortably high.
Zandi on whether and how to fund the UI benefits:
It would be ideal if the funds for extending UI benefits were made available, not this year, not next year, but when the economy is back in full swing, unemployment is moving lower. Then, I think it would be prudent that this would be paid for. But, I believe, given the risks, paying for it should not be a necessary condition for passing [the extension] ... The risks are just too high.
Zandi on whether UI is discouraging people from looking for work:
There are some arguments that unemployment insurance, these programs, is impeding job creation. There are people who are taking advantage of the system, and gaming the system, and will begin to look for work [when benefits expire] ... I’m sure there are cases where that is true. But I don’t think that’s a broad problem ... There are 5 unemployed workers for every job opening. That’s well above what one would see in a well-functioning labor market, where it would normally be around one to one. For the vast majority of people receiving unemployment insurance, it’s not because they want to be there.
Zandi on the long-term unemployment problem, and the unprecedented lapse in extended benefits:
It’s only gotten worse for the long-term unemployed ... Congress has never before not extended long term unemployment benefits when unemployment is this high. Typically, it has extended benefits even when unemployment has been much lower ... In some ways, this is uncharted economic territory ... We’ve never seen this many long-term unemployed, or seen this share of long-term unemployed [in the overall pool of unemployed persons]. All the evidence points to it not being good [for them].[2]
Senator Debbie Stabenow (D-MI) eluded to why she thinks deficit reduction over job creations is short sighted;
Stabenow on taking away from the stimulus to pay for benefits:
...When [Republicans] propose taking dollars from the recovery fund, which are creating jobs right now ... it makes no sense. If you want the economy to improve, to take money away from job creation, to help who are out of work — that makes no sense.
It’s more than a principle for us. It’s about whether or not it’s going to benefit the economy, as well as benefit families, and whether or not we’re going to be taking money out of one pocket in order to put it in the other pocket.
Stabenow on the rest of the jobs bill:
...They’ve [GOP] been blocking the jobs bill for eight weeks, right when we’re hearing how fragile the economy is, and how fragile confidence is. They’re talking down the economy, rooting for us to fail, and and it is not helpful when there’s such a fragile confidence and a lot of people who have resources are sitting on the capital because of all the messages being sent.
Stabenow on the possibility of passing anything increasing the deficit:
As much as getting things done involves people working across the aisle in good faith — I can’t promise you that after we’ve seen 245 objections in the Senate [this year] ... I think unfortunately, the Republican strategy is very clear. But I can tell you, we are going to continue to come forward with solutions and offer, reach out and offer to work across the aisle to get things done.
But it is very, very difficult. But, we will continue to do that, because we’re in a huge crisis as a country, and we’re wasting time, precious time, while people are shaking their heads trying to figure out what’s going on here. And that appears to be a strategy, and it’s unfortunate if that strategy works.
But we have seen the Senate brought frankly to a stalemate, on one side people who are voting against Wall Street reform ... people who are voting with big oil against the jobs bill, with corporations sending jobs overseas. And they clearly are willing to sacrifice middle-class families who have lost their jobs. And that is being played out on the Senate floor every day.[2]
Republicans have two positions that they are pushing. One position is that extending unemployment is causing unemployment. Their other position is that providing extended unemployment benefits is no longer an emergency, which requires they be offset with spending cuts or tax increases. They would have us believe that their filibuster of the extension of UI benefits is a matter of fiscal policy and deficit reduction but the numbers just don't support that position;
...First, they claim that benefits discourage people from working. Second, they object that the Democrats' proposal will add to the national debt.
On the first point there is a considerable amount of economic research. Most indicates that in periods when the economy is operating near its capacity, more generous benefits may modestly increase the unemployment rate. However, they are less likely to have that effect now. The reason is simple: the economy does not have enough jobs. The latest data from the labour department shows that there are five unemployed workers for every job opening.
In this context, unemployment benefits may give some workers the option to remain unemployed longer to find a job that better fits their skills, but they are unlikely to affect the total number of unemployed. In other words, a $300 weekly unemployment cheque may allow an experienced teacher the luxury of looking for another teaching job, rather than being forced to grab a job at Wal-Mart.
However, if the teacher took the job at Wal-Mart, then this would simply displace a recent high-school graduate who has no other job opportunities. That might be a great turn of events in Republican-econ land, but it does not reduce the overall unemployment rate, nor does it benefit the overall economy in any obvious way.
The other argument the Republicans give is that these bills would add to the national debt. For example, the latest extension of unemployment benefits would have added $22bn to the debt by the end of 2011. This means that the debt would be $9,807,000,000 instead of $9,785,000,000 at the end of fiscal 2011, an increase of the debt-to-GDP ratio from 65.3% to 65.4%.
It is possible that Congressional Republicans, who were willing to vote for hundreds of billions of dollars of war expenditures without paying for them, or trillions of dollars of tax cuts without paying for them, are actually concerned about this sort of increase in the national debt. It is possible that this is true, but not very plausible.
The more likely explanation is that the Republicans want to block anything that can boost the economy and create jobs. Throwing people out of work may not be pretty, but politics was never pretty, and it is getting less so by the day.[3]
A recent article in the AOL News highlights the real cost of what this .1% GOP argument is costing some Americans;
In one of the darkest tallies of the nation's still-sputtering recession, experts say financial desperation has played a significant role in increased calls to suicide-prevention hot lines -- and likely has led to increased suicide rates.
While government statistics on suicides often lag by two or three years, experts say the easier-to-track calls to hot lines have grown significantly. The National Suicide Prevention Lifeline, which operates 24-hour crisis help lines around the country, reported an increase of 18 percent from January to May this year. The rates have fluctuated wildly, from 13,424 in January 2007 to a peak of 59,500 two months ago.
...An informal tally of 19 states by the Wall Street Journal in November found an increase of 2.3 percent in the 2008 suicide rate over the 2007 rate. Other news outlets around the nation have recently reported a troubling flow of suicides and murder-suicides by people facing crippling financial troubles, including:
* An armed man facing foreclosure in Chattanooga, Tenn., who called police early July 1 threatening suicide. Authorities said that after officers arrived, the man talked with them from the porch of his house and then burst down the steps waving his gun while screaming, "Suicide by cop!" He died in a hail of bullets.
* A husband in Santa Ana, Calif., who called police later that same day to say he had shot his wife while she slept and then overdosed on Valium in a murder-suicide pact the morning they were to be evicted from their apartment. He survived and has been charged with murder.
* A husband and father in Anaheim, Calif., facing foreclosure and a mountain of credit card debt, last month shot and killed his wife, critically wounded their 3-year-old son, shot at but missed their 5-year-old son and then killed himself, police said.[4]
I hope congress is enjoying their 10 day vacation, we all know how hard they are working to repair the damage that has been done to this country and its workers.
Our policy makers need to know that there are real consequences behind their action (or inaction). On capitol hill, this may be politics as usual, but out here in the real world it's a matter of survival...for some people, it's matter of life and death.
As David Axelrod said, "I've made the point that as a matter of policy and a matter of politics that we need to focus on this [deficit reduction over job creation]"...indeed it is Mr. Axlerod, politics seems to be all Washington knows!
Some lawmakers have decided that it's more important to have a pretty lawn than it is to save the house...
Sources:
[1] http://www.huffingtonpost.com/...
[2] http://washingtonindependent.com/...
[3] http://www.guardian.co.uk/...
[4] http://www.aolnews.com/...