Forget the Deficit; People Need Jobs
The state of America's union is stark. The economic collapse triggered by the bursting of the housing bubble continues to take its toll.
We know the statistics. Nearly one in five American workers is unemployed or underemployed. That means wages are losing ground. One in three homes with a mortgage is under water. Millions of Americans are headed to losing their homes.
That will leave families adrift, children displaced.
The desperate effort to keep the financial system from failing has succeeded. It has saved the big banks -- leaving them more concentrated than ever -- but not succeeded in removing the clot in financing. Small businesses can't get loans; homeowners can't get mortgages adjusted. Finance is like the blood of the economy. When there is a clot, the economy can't work and people suffer.
Republicans argue that the president's recovery plan has failed. Then they prescribe the same poison that created the breakdown in the first place. They want more top-end tax cuts, more breaks for business, more deregulation. We tried tax cuts under Bush; it leads nowhere.
The reality is that the recovery plan created or saved millions of jobs. Aid to states and localities kept teachers and police from being laid off in large numbers. Spending on infrastructure helped put some to work. Investment in new energy created new jobs. Aid to the unemployed -- extending unemployment benefits, subsidizing health care COBRA payments, and providing food stamps -- put money into the pockets of those who need it most.
The problem with the president's plan -- as any honest economist will tell you -- is that it wasn't big enough. The collapse was far deeper than the president's economists predicted.
We need another big jobs program. Aid should go to states and localities that now face brutal cuts that will lay off teachers, police and professors. Public jobs programs -- a green corps, an urban corps -- should target hard-hit areas like the Midwest and urban centers. We should invest in infrastructure by repairing schools, weatherizing public buildings and creating the projects that will hire construction workers.
Without these commitments, there will be no recovery. Businesses won't expand into an economy in which one in five people are unemployed. Exports won't increase -- particularly with the Chinese continuing to manipulate their currency. Consumers have taken a $10 trillion hit on assets, and are tightening their belts. States and localities are facing brutal cuts.
People are confused and angry. They see high deficits and think the money is going to Wall Street. There is a crisis of confidence as well as a grinding fear of what comes next.
Here we need the president to lead and take on the naysayers and the false leaders. He must lay out what needs to be done, and rally the country to act.
The pollsters say independents are angry about deficits, so Washington is talking about deficit reduction. "If we expect families to balance their budgets in hard times, shouldn't the government do so also?" goes the mantra.
That is the big lie because, in reality, when everyone else is cutting back, government must step in and put people to work. This will require deficits because tax revenues are down and expenditures on unemployment and food stamps are up.
The simple fact is, you can't balance the budget without generating economic growth. Any attempt to do so now will deepen the downturn. Once people go back to work, and the economy gets going, tax revenues will go up, emergency spending will decline and steps can be taken to bring the deficit down. But it is utter foolishness to do so before people are at work.
That's why the State of the Union is so important. It is vital that the president use this moment to set the direction, to rally the country, to take on the naysayers and to call this country to move forward.
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