The latest Associated Press-GfK poll found nearly three-quarters of survey respondents disapprove of the way Congress is handling its job, with 68 percent disapproving of Republicans compared with 60 percent disapproving of Democrats. 

On September 23, 2010, Republicans issued their new manifesto, although they are careful to avoid referring to it as such (negative connotation).   Republicans are calling it their “Pledge to America,” a 21-page document (plus photos) composed to show the American voters that they are listening to an angry public fed up with Congress and both parties.    

Since May, Republican leaders have been asking for input from American voters who logged in to a taxpayer funded Republican web site called America Speaking Out. 

According to the three-month Alexa traffic rankings, the AmericaSpeakingOut.com audience and visitors to the site view an average of 2.5 unique pages per day. Its audience tends to be aged under 25 and over 45; they are also disproportionately childless, moderately educated men earning over $30,000. Almost all its audience is located in the U.S.  

As I looked at the Pledge and the history leading up to it, I realized that covering the subject would be too long for a single blog entry, so it will be divided up into several consecutive parts. 

The America Speaking Out Survey

The number of responders was quite small in relation to the number of voters, but they should be commended for taking the time to respond. 

For the 2008 election, there were 146 million registered voters.  That was 71 percent of voting-age citizens.  131 million people voted (64 percent).  Normally, about 50 percent vote.   

There is no guarantee that the responders to the survey were all voters, or that they were U.S. citizens, or lived in the U.S. or that they were not part of the Republican team loading the survey.  For that we must rely on their honor. 

There was one suggestion under Fiscal Responsibility / Waste that stated the Republican platform almost word for word. 

The counts of people submitting ideas and voting in the subcategories far exceeded the total counts given in the overall categories. 

One responder was identified as the most active, with nearly 100,000 activity points given for submitting ideas, responding to ideas, and voting on ideas.  There were no other profiles mentioned, but a handful of super active participants could have loaded the response balance.  I could elect whomever I wanted if I was allowed to vote an unlimited number of times.

There were a fair amount of opinions from people with incorrect information, such as thinking that public officials get full salary and benefits for life after serving one term, or thinking that candidates don’t want to offend illegal aliens, because they will vote them out of office. 

As a note, most states require a picture ID to register to vote, and in a few years, federal law is expected to require citizenship for licenses.   This may handicap the elderly, the challenged and other citizens who may want to vote, but most have a Social Security card that requires proof of citizenship, and Medicaid recipients must now prove citizenship.  If there are illegal aliens voting, it’s a small percentage that would risk being discovered and deported. 

There were complaints that some ideas that were submitted several times were rejected with an “inappropriate message.”

Survey Summary

Ed.Note: I reviewed the website, and extracted those ideas that had the most votes, as well as the essence of the comments I felt were the responders’ hot buttons.  Some items were relocated from their website category and condensed for reading clarifty.

Job creation and Fiscal responsibility were the top two hands-down winners. 

Job Creation

Responders suggested stopping both the outsourcing and insourcing of jobs.  Tax breaks should be eliminated and taxes increased for companies who outsource to compensate for lost American worker revenue.  Heavily fine companies employing illegal immigrants (estimate 12 million living in the U.S.) and deport the immigrants. 

Responders suggested making unemployment eligibility mean “I can’t find a job I am qualified for” and not “I can’t find the job I want”. If a person is deemed physically fit to work, they should not simply be able to reject a job and get unemployment because it’s not what they want to do.  Too many people have reached a comfort level on unemployment. 

Fiscal Responsibility

Responders targeted members of congress, suggesting they reduce staff, eliminate postal privileges, close office gyms, eliminate travel budgets, sell their limos, and revoke their military aircraft privileges.  Require all Congressional travel expenses to be public within 30 days of travel. 

In other words, these angry citizens want the members of congress to have citizen job benefits like “normal” people. 

Prohibit legislators and their employees and families from receiving money and other gifts from businesses and lobbyists. Our representatives should be accountable to one and only one interest, their constituents.

An example of the anger people have with Congress  is “I think we should quit giving the resigned politicians a pension, Most times they have done nothing to deserve it. Think of the money the government would save. They are not entitled to it.”

Responders suggested reducing the size of our military spending drastically.  It’s currently over 50% of our national budget and doesn’t need to be so gargantuan. Our carrier fleet alone is several times larger than the entire world’s fleets put together. If you cut that by itself you’d save the American taxpayer quite a bit of money and even have some left over for infrastructure improvements, better schools and social programs that will make this nation stronger over all.

Welfare in the United States has been transformed to the point where it’s no longer designed to help people get by during bad times. Instead, welfare is used as a permanent crutch for the recipient and as a political advantage to one political party or another.

Government Reform:

Responders suggested a complete audit of federal agencies and programs, assessing their Constitutionality, and identifying duplication, waste, ineffectiveness, or better left for states or local authorities.  Streamline Government; there are 100 Agencies doing substantially similar things. Government should be managed more like a company.

No unrelated spending amendments should be allowed.  Americans HATE the ‘earmarks’ that Washington pushes through.  Too often spending amendments are attached to unrelated bills. If the spending can’t pass on its own, don’t pass it.  Make a rule that each bill put forth in the house and senate only deal with the bill, no add-ons for pork or other pet projects that don’t deal with the crux of the bill. 

Require each bill to identify the specific provision of the Constitution that gives Congress the power to do what the bill does.  All legislation must be read in full on the floor of Congress. Everyone voting on a bill must certify having heard the entire reading or that they have read it personally in it’s entirity.

Transparency / Open Government:

Transparency – American taxpayers deserve to see where their tax dollars are going, on the way into the legislative process and on the way out. This means ending the practice of rushing bills through Congress at the speed of light by requiring legislation be posted online for five days before it can be scheduled for a floor vote. This gives taxpayers the opportunity to read bills and offer feedback and potentially devastating legislation.

We also must demand that ALL government expenditures, down to the line-item expense, be put online in a searchable, easily accessible format so taxpayers can track, dollar-for-dollar, where their hard-earned money is going. The only way to stop the spending is to keep representatives accountable – American taxpayers deserve the tools that will empower them to become good fiscal watchdogs of the state.

Require an on-line, instant update website listing what lobbyist’s are courting what politicians and for what reason.  

Tax Reform:

Replace all taxes with a simple flat income tax on all individuals and corporations.  This way every one is taxed at the same rate, no more of the “progressive” tax scale.

ENACT THE FAIR TAX. collect taxes from EVERYONE here (including tourists and illegal aliens), at the point of consumption where it is clear, straight forward and visible, they are obvious every time you purchase something at the retail level.  

American Values / Life:

Abortion is not healthcare. Abortion is a complex, difficult moral issue. It is not the proper role of the government to make our moral decisions for us. Let people make up their own minds and take responsibility for their decisions. If we are to be the party of small government, less government intrusion, and personal liberty, we must stop trying to legislate abortion away. It’s not the government’s place to be a nanny that chooses our morality for us.  The sanctity of life should support whatever a woman wishes to do with her body. Without this right freedom is meaningless

Illegals are giving birth in the USA just to have an American child and stay here illegally (known as ‘anchor babies).  If an illegal gives birth in the USA, the mother and child should be deported back home and the child not recognized as an American citizen. They need to go back to their home country and follow the legal process of becoming an US citizen. Modify the 14th Amendment allowing anyone born in the United States citizenship.

Health Care:

Repeal Obamacare and allow companies and individuals to purchase insurance across State lines.  We need to return to one deductible, maximum deductible per family, and then 80/20 coverage with the exception of 80/20 from the start for prescription drugs.  Make health care and insurance more affordable by enabling a competitive, open, and transparent free-market health care and health insurance system that isn’t restricted by state boundaries. 

The federal government shouldn’t be in the business of forcing you to buy health insurance and taxing you if you don’t.  Make health a right, not a privilege. Treat protection from injury or disease just like protection from crime or fire. Imagine if the police and fire departments were a for profit industries. Wealthy neighborhoods that could afford top quality protection would prosper, middle class neighborhoods would become slums, and poorer neighborhoods would simply deteriorate from crime and burn to the ground. Take the profit out of healthcare. 

InfraStructure:

Building a modern, safe and efficient infrastructure is critical to creating U.S. jobs.

We need to vastly improve our power grid as a part of any new energy initiative. A large percentage of our energy is lost due to an outdated power grid.

Government needs to invest more in mass transit in the cities and develop realistic mass-transit between urban hubs. Stop spending our tax money to create new streets and infrastructure in outlying areas.

There was a small but consistent thread of suggestings regarding term limits for all members of Congress. 

Republicans have said that the America Speaking Out program was about the short term, not about an election, but there is no denying the project bears a strong resemblance to the Contract with America, the 1994 document that laid out what the party would do if it took control of the House. 

Next, we’ll look at the last Contract with America Republicans published in 1994.  Although they swept into control of Congress, was it the contract or were there other reasons? 

GOP Pledge—1994 Contract with America

More than half of all Republicans in the House and nearly half in the Senate happily took credit in their home districts for the stimulus money they voted against.

As of the end of August 2010, $289.4 billon has been paid out to the states.  Many Americans think that at least half the money has been wasted.  Economists have a higher opinion, but no one thinks it is a home run. 

The big concern of Americans is the high unemployment numbers.  We seem stuck in the 9.5% range, but what people don’t realize is that every year, 1.8 million new workers enter the Civilian work force, and just filling these jobs leaves the unemployment rate stuck.  

Many agree the stimulus bill has created jobs.  Economists say it has generated salaries for as many as 2 million workers who would have been out of work without the stimulus, and the government on Recovery.gov points to nearly 750,000 jobs funded by the bill. 

The nonpartisan Congressional Budget Office calculated that the stimulus package saved or created between 900,000 and 2.3 million jobs.

Although the Republicans point to tremendous job losses, it would have been 2 million jobs worse without the stimulus that they voted against as a bloc.

These paychecks, in addition to unemployment benefit extensions and tax cuts have all done their part to advance the economy.  But with only about 35% of the stimulus money spent, it is difficult to say whether it will work or not.

Before the stimulus bill was passed, unemployment insurance was cut off at 26 weeks.  After that time, unemployed workers were dropped from the Civilian labor force unless they had looked for work in the previous 4 weeks.  If they said they had looked for work in the last 12 months, they were considered marginally attached to the labor force.  As of the end of August 2010, there were 2.37 million workers in that category.  Within the marginally attached workers, were 1.1 million discouraged workers, who are no longer looking for work.   

The stimulus bill extends unemployment benefits to 33 weeks, and raised the government payment by $25 per worker per week.  Under the stimulus bill, the government also provides 65% of health insurance cost for the workers for up to 9 months after separation.  This provides much of the employer cost portion that ceased when their jobs were terminated. 

Economists have long expressed that unemployment benefits are a core motivation for economic stimulus by giving people some small discretionary income.  One of the possible side effects is that the financial “cushion” encourages workers to spend their efforts to find an “ideal” job rather than the first one that comes their way. 

In another job-saving effort, stimulus money has been sent directly to states and local governments to help them balance their budgets and avoid mass layoffs of teachers, police officers and firefighters, since states are restricted from deficit budgets. 

Instead of deficits, states and local governments raise cash through the sale of municipal bonds.  During the recent financial crisis, the bond market froze, forcing the municipal issuers to face big budget cuts and cancel programs.  Under the Build America Bonds program, the federal government subsidizes bond payments made to investors, raising the yield to very attractive rates, stimulating the economy and lowering the municipality’s borrowing costs. 

Close to half of the stimulus funded jobs are those that keep states and local governments running.  Those salaries provide money that families can spend into the economy.  

To encourage home sales in an economic sector that was at the heart of the financial meltdown, first-time homebuyers were offered an $8,000 tax credit until the end of November 2009. 

Although home sales rose during much of 2009, as soon as the tax credit expired, home sales plummeted.  The analysis was that people who would have purchased a home anyway moved up their purchase date to take advantage of the tax credit.

There are huge numbers of programs being funded simultaneously in the stimulus bill.  Many of the programs are slow to mature and show benefits.  These are investments in the country’s future rather than a stimulus. 

The stimulus bill provided $100 million for improving and repairing infrastructure items like roads and bridges sorely needing those repairs.  It would also put people to work.  This was the image of the stimulus presented to Americans, and it stuck.  It was, however, a proverbial “drop in the bucket.” 

Although money was allocated for “shovel ready” building projects, there weren’t that many projects ready to go, and a lot of the money has not yet been spent.  The reason?  States are planning and proceeding carefully, trying to get the best value for the money they receive. 

On Labor Day 2010, the president proposed allocating $50 billion to repair 150,000 miles of roads, 4,000 miles of rail lines, and 150 miles of airport runways.  These are expected to create jobs immediately as well as invest in easier transportation of goods and people for the future.  Congressional approval is needed.

The president also intends to urge Congress to permanently extend a research and development tax credit that expired in 2009, and allow companies to write off all of their investments in plants and equipment through the end of 2011. 

Other investments already in the stimulus bill are $40 billion for upgrading the nation’s energy grid.  That should come in handy as solar activity peaks in the next five years and can potentially burn out electrical grids and satellites.  This program will provide many jobs but is still in the early planning stages. 

Another investment drive is green technology, meant to minimize our dependence on foreign oil and minimize potential threats from the Middle East.  The problem is that green technology is still in its infancy; it will provide jobs, but maybe for our children.  It is an investment, not a stimulus. 

With the midterm elections coming up on November 2, and historical evidence that impatient voters will try something new and vote out the “ins”, the president and his council are scrambling for something that will get the notice of American voters.  It is not enough that this president has passed massive reform legislation that will alter the future of this country and its citizens for the better.  When American voters get in that booth, they ask, “What have you done for me lately?”  If nothing comes to mind, they’ll vote for promises. 

The $850 billion will do a lot of good rebuilding America’s future, but the voters need jobs today, and jobs in sufficient quantities are not in view.  The problem is that many stimulus benefits are far into the future. 

Dinner for the family is needed tonight. 

Employer tax breaks follow the “trickle-down” economic theory that says tax breaks given to employers will allow them to save enough money to hire more people who in turn will spend their income on retail goods that will improve the economy and lead to more jobs.  It does not work in a wealth-driven society like ours, but instead causes an ever-larger wealth gap between the “haves” and the “have-n0ts”.  

Tax breaks fall on deaf ears, when an employer is worried whether his goods will sell today and provide a tomorrow for his company and his family.  He will conserve his cash and restrict production in case of a downturn, and therefore unintentionally causing a downturn.  The cash stays with the employer and improves his profit.

The opposite of trickle-down economics is the “trickle-up effect.”  This approach give the tax breaks to the people.  They have more money left over from supplying their basic needs and with their disposable income they stimulate retail trade by buying goods that will improve the economy and lead to more jobs.  

The key to recovery is stimulating retail.  The only way to do it is to put more cash in the wallets of consumers.  An economy runs on cash circulation; as with people, stop the circulation and the patient dies.  

The modification of the Bush tax breaks proposed by the president is a step in the right direction.  By continuing the tax breaks for those earning less than $250,000, it will not cut off their disposable income. 

What the country also needs is an employment incentive; the opportunity for the unemployed to perform work and feel accomplished. 

There is still a lot of money to be spent and a lot of people unemployed.

What if unemployed workers were offered the education they needed to work at a trade, or get their high school diploma?  It is a fact that unemployment is twice as high for those without a high school education.  It is a fact that graduates in fast growing fields like health care and technology are hired much faster than those unskilled. 

What if unemployed workers were encouraged to volunteer as part of their workweek?  People generally don’t like to be charity recipients.  We live in a fair trade society – when we receive something, we have been taught to feel we should give something in return. 

What if?

President Franklin Roosevelt in 1935 had the right idea, employing thousands in public service under the Public Works of Art Project (PWAP), Federal One and others. 

Writers, artists, musicians and other unemployed workers wrote, painted and performed for the depressed public and were paid.  They brought the country’s records up to date by recording and cataloging historical information; they worked on building projects; they repaired bridges and roads; they painted murals in public buildings.  If they had a skill, they used it and taught it to others; if they had no skill, they used their muscles.   The PWAP program failed because of mandated “guidance” from Washington D.C. and the unemployment problem was solved with the outbreak of WWII, but the idea is still compelling. 

There are many opportunities to volunteer in our own backyards.  Every town has Habitat for humanity, food pantries, libraries and other organizations always looking for help.  The requirements are generally simple; just show up and work “friendly.”  It also looks good on a resume. 

What if we suggest a scenario and make an assumption that many business owners need the help, but don’t have the money to hire new employees.  What if they put out a call to the local unemployment office describing their needs? 

What if the issue of salary and benefits never came up – they would be provided by the state unemployment agency.  Perhaps during their “unemployment” employment, the worker would learn a new skill, something of value to put on their resume.  Perhaps their “unemployment” employer would see the value of hiring that person, or provide a glowing reference to their next interview. 

What if?

Jobs:

Nonfarm payroll employment continued to weaken this month (down 263,000 in September) ending a slowdown trend (201,000 in August (revised), 304,000 in July (revised), 467,000 in June, 345,000 in May, 539,000 in April and 633,000 in March). 

After the lowest level of job losses in a year, employment slipped by about 50,000 jobs from last months level. 

The average 3-month job layoff figure of 256,000 for July through September 2009 dropped 21 percent from the same average last month, when it was 324,000 for June through August, and 57 percent from the previous 3-month period (April through June) when it averaged 450,333 (also down from 505,667 for March through May). 

Although the unemployment slowdown has lost its momentum this month, the numbers still indicate that companies are approaching their maximum “leanness” and sustains perceptions that the economy gradually will swing to recovery.

Unemployment has increased steadily by 0.4 or 0.5 percent every month from December 2008 through May 2009.  August was the first month the increase was 0.3 percent.  September is similar.

The number of unemployed persons increased in September by 214,000 (August by 466,000, a decrease in July of 267,000, increases in June of 218,000, May of 787,000, April of 563,000 and March of 851,000.  Since the start of the recession in December 2007, 7.8 million workers have lost their jobs. 

Total unemployment has risen from 11.6 million (7.6%) in January to 12.5 million (8.1%) in February, to 13.2 million (8.5%) in March, 13.7 million (8.9%) in April, to 14.5 million in May (9.4%), 14.7 million in June (9.5%), 14.46 million in July (9.4%), and 14.9 million in August (9.7%).

The current rate is 9.8% and the number unemployed is at 15.1 million. 

Unemployment is the highest since June 1983 and has doubled since the start of the recession in December 2007.  In a healthy economy, around 125,000 jobs a month must be added and filled just to keep the unemployment rate stable.

There is little doubt at this point; we will hit 10% unemployment in the near future. 

The number of persons working part time for economic reasons (sometimes referred to as involuntary part-time workers) rose to 9.2 million from the 9.1 million in August (8.8 million in July, and 9.0 million in June).  These persons had their hours cut back or were unable to find full-time jobs.  Since the start of the recession, the number of such workers has increased by 4.4 million, and has remained relatively constant since March 2009. 

The unemployment numbers look to be peaking.

Long-term unemployed persons (jobless for 27 weeks and more) has tripled since the start of the recession to 5.4 million since December 2007, adding 450,0000 to that number in September.  One in three (35.6%) unemployed persons are in this category. 

Ed.Note: It is possible that as consumer and business confidence is improving, more workers are starting to look for jobs again, returning to the workforce in anticipation of better employment conditions.  This drives the unemployment rate higher.

Construction job losses led the month (down 64,000 for September, 65,000 for August, 76,000 for July, 79,000 for June, 59,000 for May, 110,000 for April and 161,000 for March) with a total of 1.5 million since December 2007. 

Manufacturing was a close second (down 51,000 for September, 63,000 for August, 52,000 for July, 136,000 for June, 156,000 for May, 149,000 for April and 161,000 for March) with widespread job losses totaling 2.1 million since December 2007. 

Education and health services continued to add jobs, with payrolls increasing by 19,000 (52,000 in August and 21,000 in July).  Government employment fell by 53,000 (18,000 in August and 28,000 in July).

Retail trade employment dropped by 39,000 (9,600 for August, 44,00 for July, 18,000 for June and 47,000 for April). 

Service-providers stayed relatively the same after cutting 80,000 workers in August, while the goods-producers lost 136,000 jobs.

Professional and business service also stayed relatively the same after decliningby 22,000 in August, less than the 38,000 in July, 118,000 in June, 51,000 in May, 122,0000 in April and 133,000 in March. 

Unemployment spreads stayed relatively the same with the highest among teenagers (25.9%), followed down by African-Americans, then Hispanics.  The lowest unemployment started with Asians (7.4%) followed up by Adult women (7.8%), Whites, then Adult men (10.3%). 

The good news from this data, is that the job losses seem to be lessening.  It is perhaps due to fewer jobs available to lose, but the lower figures are an encouraging sign. 

The average workweek edged down by 0.1 to 33.0 hours in August.  This figure closely correlates with overall output and gives clues on when firms will start hiring. 

Average hourly earnings (reflecting the recent increase in the legal minimum wage) edged up to $18.67 ($18.65 in August, $18.59 in July), rising for a fifth straight month.  

 Workforce:

The total Civilian labor force stands at 154.0 million (down 571,000 from August).  There are nearly a million fewer workers in the work force than in June.   There are now 15.1 million people unemployed putting the rate at 9.8% of the available work force, last reached in June 1983. 

The Civilian labor force usually grows as a recession winds down and optimism about finding work grows.  But as long as Americans remain anxious about their jobs, consumer spending is not expected to grow enough to power an economic rebound. 

The employment population ratio, at 58.8 percent, has declined by 3.9 percent since the recession began in December 2007.

Comparing now with the final month of the last major downturn in November 1982, the total Civilian labor force then stood at 111.1 million.  In that month, there were 11.9 million people unemployed accounting for 10.8% of the available work force (average for the year was 10.6 million unemployed with the rate at 9.7%). 

Looking at jobs needed to reduce unemployment
with the total Civilian labor force at 154.0 million:

.
To restore employment to the 5.5% level of 2008, about 6.6 million people will have to regain their job or start new jobs.  It is a tall mountain to climb. 

Ed.Note:  Government and economists foretell that the “normal” unemployment rate will move up to 8% from its current 5.5% level.  With the current Civilian labor force, that means that on a permanent basis there will be roughly 12.5 million people unemployed — more than 4 million more than at the “normal” level today. 

Update: October 5:  The U.S. service sector grew in September for the first time in 13 months.  The Institute for Supply Management (ISM) reported that its service index hit 50.9 last month, up from 48.4 in August.   A reading of 50 is the dividing line between growth and contraction. 

Other encouraging signs were that the new orders index rose to 54.2, climbing over the dividing line for the first time in a year.  New orders are an indicator of future activity.  In addition, business order backlogs rose for the first time in 14 months.

Five industries grew in September; wholesale trade, retail, construction, utilities and health care.  In addition to healthcare and educational services, support services for companies added jobs, another encouraging sign. 

 Data collection:

The Census Bureau surveys 60,000 households across the country to insure an accurate demographic survey.  The unemployment rates are extrapolated from the survey results. 

The quoted unemployment rate excludes people who have stopped looking for work because they believe no jobs are available (discouraged workers) and others outside the labor force.  They are counted separately.  Their number has nearly doubled in the previous 12 months.

 Stimulus (Recovery Act):

The president’s $787 billion stimulus bill signed into law hopes to create about 3.5 million jobs.  Lower estimates put that figure at 2 to 2.5 million jobs by the end of 2010, reducing the unemployment rate to 7+%. 

The White House Council of Economic Advisers released a report showing the plan would save or create 1.5 million jobs by the end of 2009 and 3.5 million by the end of 2010. 

A senior White House official stated that the Obama administration’s fiscal stimulus plan will meet their previous estimates to save 3.5 million U.S. jobs by the end of 2010, but the unemployment rate at that time may be higher due to further deterioration in the economy.  White House officials have been careful to point out that estimated jobs created and saved have merely slowed continued job losses.

 Stimulus spending by state: 

As of September 30, 2009, of the
$241,105,531,529 announced
$214,964,917,646 (89%) has been made available
$90,402,704,572 (37.5%) has been paid out to the states

http://www.recovery.gov/?q=content/funding-notification

 Recession histories:

With Nov 1982 unemployment at 10.2%, and the government taking aggressive action, it was still more than five years (April 1988) from the peak before unemployment receded to 5.4%. 

The approach that time, however, was to fix the economy at the expense of the worker.

Some compare the the fall in employment to 1974-1975 and 1981-1982. If the comparison is accurate, the peak in unemployment may be reached within the next five to six months (past performance is no guarantee of the future).

Economist William Polley made a chart  that includes every recession since World War II.  It makes the chart pretty hard to read, so he simplified it with selected post-WWII recessions.

William Polley’s chart shows how the recovery from the 2001 recession took four years for employment to return to its February 2001 peak. 

Using the Department of Labor unemployment tables of unemployment rates and 5.5% as the “normal” rate of unemployment, I have analyzed things a little differently.  Of course, along the way, the Civilian labor force increases, so the percentages represent ever more workers.

The following table shows unemployment start dates, peaks and returns to the normal rate of 5.5%, Civilian labor force in millions of workers for that year, and the lengths of times from the start date in months:

 Recession peaks 1974-2009 

 Note that the unemployment peak period that started in 1974 and ended in 1979 (lasting nearly five years) was followed immediately by another peak period ending nearly nine years later.  By the end of that period, the work force had increased by more than 32%, meaning overall, almost 30 million new jobs had to be created.

 The aggressive increase in the Civilian labor force in that period can likely be attributed to post-World War II babies reaching adulthood, with some entering the labor force after secondary school and the rest entering the workforce after further education.

The periods from 1988 to 1990 and 1995 to 2008 were periods of prosperity, with low unemployment (but a building bubble). Here is the same data in graphic form:

Unemployment rates:

It is interesting to recognize that in most cases, unemployment peaks roughly one-third of the timeline for unemployment to return to its “normal” rate, so we can double the number of months from the Start to the Peak to expect to arrive at an approximate return to “normal.”

We live in hope (again, past performance is no guarantee of the future).

The next Economic Jobs report will be found at:
Economic Picture: October 2009

The last Economic Jobs report will be found at:
Economic Picture: August 2009

The not-so bad news:

• Nonfarm payroll employment continued to deteriorate this month (down 345,000), but slowed for the second month in a row (539,000 in April and 633,000 in March). This is about half of the average decline in the last six months. The number of unemployed persons increased by 787,000 (more than April with 563,000 but less than March with 851,000).
• Total unemployment has risen from 11.6 million (7.6%) in January to 12.5 million (8.1%) in February, to 13.2 million (8.5%) in March, 13.7 million (8.9%) in April, to 14.5 million in May, putting unemployment at 9.4%.
• Since the recession began in December 2007, 9.5 million jobs have been lost across nearly all major private-sector industries. In the last 12 months, the number of unemployed has risen by 7 million persons.
• Long-term unemployed (jobless for 27 weeks and more) has tripled since the start of the recession to 3.9 million since December 2007, an increase of 268,000 when measured last month (better than the 500,000 measured for April).
• Employment rose in April in the federal government due mostly to hiring of Census 2010 temporary workers. Education and Health care employment grew by 44,000 last month, evenly divided between the two. Other than that, job losses in May continued in most major private-sector industries.
• Manufacturing again led the month in losses (down 156,000 consistent with March and April’s 149,000 and March’s 161,000) with widespread job losses in the component industries and transportation accounting for more than half the decline.
• Since the peak in February 2000, employment in motor vehicles and parts has fallen about 50%.
• Construction job losses edged into second place (down 59,000 but less than April’s 110,000 and March’s 161,000). Professional and business services were third (down 51,000 but less than April’s 122,0000 and March’s 133,000). Finally, retail trade jobs dropped by 18,000 (less than April’s 47,000).
• The good news from this data, is that the job losses are getting less. It is perhaps due to fewer jobs available to lose, but the lower figures are an encouraging sign.
• With approximately 1.9 million college graduates expected to enter the work force in May 2009 as graduates of four-year colleges, unemployment will get a huge increase, since many businesses are laying off employees rather than hiring.

 May 2009

The total Civilian labor force stands at 155.1 million (up 350,ooo from April), slightly increased from the number at the end of 2008.  Again, there was a net decrease in jobs found to jobs lost of 437,000.

There are now 14.5 million people unemployed putting the rate at 9.4% of the available work force.  In modern times, this unemployment rate was last reached in September 1983. 

Comparing now with the final month of the last major downturn in November 1982, the total Civilian labor force then stood at 111.1 million.  In that month, there were 11.9 million people unemployed accounting for 10.8% of the available work force (average for the year was 10.6 million unemployed with the rate at 9.7%).

Unemployment: Spreads stayed relatively the same with the highest among teenagers, rising to 22.7% from 21.5% last month, followed down by African-Americans, then Hispanics.  The lowest unemployment started with Asians at 6.7% followed up by Adult women at 7.5%, Whites, then Adult men.  

Note: The Census Bureau surveys 60,000 households across the country to insure an accurate demographic survey.  The unemployment rates are extrapolated from the survey results. 

The quoted unemployment rate excludes people who have stopped looking for work because they believe no jobs are available (discouraged workers) and others outside the labor force.  They are counted separately.

Looking at jobs needed to reduce unemployment
with the total Civilian labor force at 155.1 million:

.
To restore employment to the 5.5% level of 2008, more than 7 million people will have to regain their job or new jobs.  It is a tall mountain to climb.  Add that the 1.9 million graduates from four-year colleges expecting to enter the work force.  Those going on to higher education will reduce that number.

With Nov 1982 unemployment at 10.2%, and the government taking aggressive action, it was still more than five years (April 1988) from the peak before unemployment receded to 5.4%. 

The approach that time, however, was to fix the economy at the expense of the worker.

The president’s $787 billion stimulus bill signed into law hopes to create about 3.5 million jobs.  Lower estimates put that figure at 2 to 2.5 million jobs by the end of 2010, reducing the unemployment rate to 7+%. 

 Some compare the the fall in employment to 1974-1975 and 1981-1982. If the comparison is accurate, the peak in unemployment may be reached within the next five to six months (past performance is no guarantee of the future).

Economist William Polley made a chart  that includes every recession since World War II.  It makes the chart pretty hard to read, so he simplified it with selected post-WWII recessions.

William Polley’s chart shows how the recovery from the 2001 recession took four years for employment to return to its February 2001 peak. 

I have analyzed things a little differently, using the Department of Labor unemployment tables of unemployment rates and 5.5% as the “normal” rate of unemployment.  Of course, along the way, the Civilian labor force increases, so the percentages represent ever more workers.

The following table shows unemployment start dates, peaks and returns to the normal rate of 5.5%, Civilian labor force in millions of workers for that year, and the lengths of times from the start date in months: 

Recession peaks 1974-2008

Note that the unemployment peak period that started in 1974 and ended in 1979 (lasting nearly five years) was followed immediately by another peak period ending nearly nine years later.  By the end of that period, the work force had increased by more than 32%, meaning overall, almost 30 million new jobs had to be created.

 The aggressive increase in the Civilian labor force in that period can likely be attributed to post-World War II babies reaching adulthood, with some entering the labor force after secondary school and the rest entering the workforce after further education.

 The periods from 1988 to 1990 and 1995 to 2008 were periods of prosperity, with low unemployment (but a building bubble).  Here is the same data in graphic form:

It is interesting to recognize that in most cases, unemployment peaks roughly one-third of the timeline for unemployment to return to its “normal” rate, so we can double the number of months from the Start to the Peak to expect to arrive at an approximate return to “normal.”

We live in hope (again, past performance is no guarantee of the future).

Ed.Note:  According to a recent New York Times/CBS News poll (April 6) of 998 adults showed that Americans have grown more optimistic about the economy, since Barack Obama took office as president.  The number of people that think the country is headed in the right direction jumped to 39 percent from 15 percent during the final days of President George W. Bush’s administration.  The number of people who still think the country is headed in the wrong direction dropped to 53 percent from 79 percent.

A senior White House official stated that the Obama administration’s fiscal stimulus plan will meet their previous estimates to save 3.5 million U.S. jobs by the end of 2010, but the unemployment rate at that time may be higher due to further deterioration in the economy.  White House officials have been careful to point out that estimated jobs created and saved have merely slowed continued job losses.

The White House Council of Economic Advisers released a report showing the plan would save or create 1.5 million jobs by the end of 2009 and 3.5 million by the end of 2010.  All recipients of stimulus funding are required to report jobs retained and created by the funds.

Ed.Note:  Government and economists foretell that the “normal” unemployment rate will move up to 8% from its current 5.5% level.  With the current civilian workforce, that means that on a permanent basis there will be roughly 12.5 million people unemployed — more than 4 million more than at the “normal” level today.

The next Economic Jobs report will be found at:
Economic Picture: June 2009

The last Economic Jobs report will be found at:
Economic Picture: April 2009

A professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts, is co-author of Green Recovery: A Program to Create Good Jobs and Start Building a Low-Carbon Economy.

This article (written November 6, 2008) appeared in the November 24, 2008 edition of The Nation.

Ed.Note: This article was interesting because it contains many of the points of the Obama Recovery Stimulus of 2009.  The article was slightly reformatted without omission or distortion of meaning to read easier online. 

Bolded passages are of particular interest; italic notes are my notes added for clarity.

A Green Public-Investment Stimulus

Recessions create widespread human suffering. Minimizing the suffering has to be the top priority in fighting the recession. This means expanding unemployment benefits and food stamps to counteract the income losses of unemployed workers and the poor. By stabilizing the pocketbooks of distressed households, these measures also help people pay their mortgages and pump money into consumer markets.

Beyond this, the stimulus program should be designed to meet three additional criteria.

1.      We have to generate the largest possible employment boost for a given level of new government spending.
2.      The spending targets should be in areas that strengthen the economy in the long run, not just through a short-term money injection.
3.      Despite the recession, we do not have the luxury of delaying the fight against global warming.

To further all these goals we need a green public-investment stimulus to
1.      defend state-level health and education projects against budget cuts
2.      finance long-delayed upgrades for our roads, bridges, railroads and water management systems
3.      underwrite investments in energy efficiency-including  building retrofits and public transportation-as well as new wind, solar, geothermal and biomass technologies.

This kind of stimulus would generate many more jobs–18 per $1 million in spending – than  would programs to increase spending on the military and the oil industry (i.e., new military surges in Iraq or Afghanistan combined with “Drill, baby, drill”), which would generate only about 7.5 jobs for every $1 million spent.

There are two reasons for the green program’s advantage.

1.      The first factor is higher “labor intensity” of spending-that  is, more money is being spent on hiring people and less on machines, supplies and consuming energy. This becomes obvious if we imagine hiring teachers, nurses and bus drivers versus drilling for oil off the coasts of Florida, California and Alaska.

2.      The second factor is the “domestic content” of spending-how much money is staying within the US economy, as opposed to buying imports or spending abroad. When we build a bridge in Minneapolis, upgrade the levee system in New Orleans or retrofit public buildings and private homes to raise their energy efficiency, virtually every dollar is spent within our economy. By contrast, only 80 cents of every dollar spent in the oil industry remains in the United States. The figure is still lower with the military budget.

What about another round of across-the-board tax rebates, such as the program the Bush administration and the Democratic Congress implemented in April?

A case could be made for this in light of the financial stresses middle-class families are facing. However, even if we assume that the middle-class households will spend all the money refunded to them, the net increase in employment will be about 14 jobs per $1 million spent-about  20 percent less than the green public-investment program (the main reason for this weaker impact is the lower domestic content of average household consumption, i.e. much of the consumption will be for foreign-made goods).

Also, it isn’t likely that the households would spend all their rebate money. Just as with April’s rebate program, households would channel a large share of the money into paying off debts. (paying off debts is not necessarily bad – it releases discretionary income for the family and increases reserves for the banks and credit card companies to extend more credit to others).

The Matter of Size

This is no time to be timid. The stimulus program last April totaled $150 billion, including $100 billion in household rebates and the rest in business tax breaks. This initiative did encourage some job growth, though as we have seen, the impact would have been larger had the same money been channeled toward a green public-investment stimulus.

But any job benefits were negated by the countervailing (counteracting) forces of the collapsed housing bubble, the financial crisis and the spike in oil prices. The resulting recession is now before us. This argues for a significantly larger stimulus than the one enacted in April.

But how much larger?

One way to approach the question is to consider the last time the economy faced a recession of similar severity, which was in 1980-82, during Ronald Reagan’s first term as president. In 1982 gross domestic product (GDP) contracted by 1.9 percent, the most severe one-year drop in GDP since World War II. Unemployment rose to 9.7 percent that year, which was, again, the highest figure since the ’30s.

The Reagan administration responded with a massive stimulus program, even though its alleged free-market devotees never acknowledged as much. They preferred calling their program of military expansion and tax cuts for the rich “supply-side economics.” (supply creates demand – see Trickle, Trickle, Up, Down, part I)

Whatever the label, this combination generated an increase in the federal deficit of about two percentage points relative to the size of the economy at that time. In 1983 GDP rose sharply by 4.5 percent. In 1984 GDP growth accelerated to 7.2 percent, with Reagan declaring the return to “morning in America.” Unemployment fell back to 7.5 percent.

In today’s economy, an economic stimulus equivalent to the 1983 Reagan program would amount to about $300 billion in spending-roughly double the size of April’s stimulus program, though in line with the high-end figures being proposed in Congress. A stimulus of this size could create nearly 6 million jobs, offsetting the job-shedding forces of the recession.

Of course, the green public-investment stimulus will be much more effective as a jobs program than the Reagan agenda of militarism and upper-income tax cuts. This suggests that an initiative costing somewhat less than $300 billion could be adequate to fight the job losses. But because the green public-investment stimulus is also designed to produce long-term benefits to the economy, there is little danger that we would spend too much. Since all these investments are needed to fight global warming and improve overall productivity, the sooner we move forward, the better. Moreover, under today’s weak job market conditions, we will not run short of qualified workers.

How to Pay for All This?

Let’s add up the figures I have tossed around. These include the $700 billion bank rescue operation being engineered by the Treasury, the $540 billion with which Fed chair Bernanke has pledged to bail out the money market mutual funds, along with unspecified additional billions to buy unwanted business debts held by banks. On top of these, I am proposing $300 billion for a second fiscal stimulus beyond last April’s $150 billion program. At a certain point, it is fair to wonder whether we are still dealing with real dollars as opposed to Monopoly money.

In fact, the whole program remains within the realm of affordability, albeit approaching its upper bounds. But major adjustments from the current management approach are needed. In particular, the Federal Reserve has to continue exerting control over the Treasury on all bailout operations. That is, we need more initiatives like Bernanke’s $540 billion program to stabilize the money market mutual funds and less Treasury fumbling with taxpayers’ money to buy either the private banks’ bad assets or ownership shares in the banks.

We need to recognize openly what has largely been an unspoken fact about these bailout operations: that the Federal Reserve has the power to create dollars at will, while the Treasury finances its operations either through tax revenues or borrowed funds (which means using taxpayer money at some later time to pay back its debts with interest).

The Federal Reserve does not literally run printing presses when it decides to inject more money into the economy; but its normal activity of writing checks to private banks to buy the banks’ Treasury bonds amounts to the same thing.

When the banks receive their checks from the Fed, they have more cash on hand than they did before they sold their Treasury bonds to the Fed. Especially during crises, there is no reason for the Fed to restrain itself from making good use (though of course not overuse) of this dollar-creating power.

The Fed is also supposed to be the chief regulator of the financial system. Now is the time to make up for Alan Greenspan’s confessed failures over twenty years in this role.

In exchange for the Fed protecting the private financial institutions from collapse, Bernanke must insist that the banks begin lending money again to support productive investments, while prohibiting them from yet another return to high-rolling speculation.  

Special measures are also needed to keep people in their homes.

The Deficit Looms

When the economy began slowing this year, the fiscal deficit more than doubled, from $162 billion to $389 billion. We cannot know for certain how much the deficit will expand. It could rise to $800 billion, $1 trillion or even somewhat higher, depending on how the bailout operations are managed.  Of course, it would be utterly self-defeating for the United States to run a reckless fiscal policy, no matter how pressing the need to fight the financial crisis and recession.  But in the current crisis conditions, even a $1 trillion deficit need not be reckless.

Let’s return to the Reagan experience for perspective. In 1983 the Reagan deficits peaked at 6 percent of the economy’s GDP. With GDP now around $14.4 trillion, a $1 trillion deficit would represent about 7 percent of GDP, one percentage point higher than the 1983 figure.

Of course, the global financial system has undergone dramatic changes since the 1980s, so direct comparisons with the Reagan deficits are not entirely valid.

One change is that government debt is increasingly owned by foreign governments and private investors. This means that interest payments on that debt flow increasingly from the coffers of the Treasury to foreign owners of Treasury bonds.

At the same time, as one feature of the crisis, Treasury bonds are, and will remain for some time, the safest and most desirable financial instrument in the global financial system. US and foreign investors are clamoring to purchase Treasuries as opposed to buying stocks, bonds issued by private companies or derivatives.

This is pushing down the interest rates on Treasuries. For example, on October 15, 2007, a three-year Treasury bond paid out 4.25 percent in interest, whereas this past October 15, the interest payment had fallen to 1.9 percent (currently 1.125 percent). By contrast, a BAA (investment grade) corporate bond paid 6.6 percent in interest one year ago but has risen this year to 9 percent (currently 8.24 percent).

As long as the private financial markets remain gripped by instability and fear, the Treasury will be able to borrow at negligible interest rates. Because of this, allowing the deficit to rise even as high as 7 percent of GDP does not represent a burden on the Treasury greater than what accompanied the Reagan deficits.

There is, then, no reason to tread lightly in fighting the recession, with all its attendant dangers and misery. Indeed, severe misery and danger will certainly rise as long as timidity-the path of least resistance-establishes the boundaries of acceptable action.

The incoming Obama administration can take decisive steps now to defend people’s livelihoods and to reconstruct a viable financial system, productive infrastructure and job market on the foundation of a clean-energy economy.

His two-year $820 billion economic recovery blueprint includes plans for computerized medical records, a national electricity grid to distribute renewable energy, lower taxes for everyone under his ‘affluent’ income line, modernized schools, and education initiatives.  The House bill includes roughly $550 billion in domestic spending and about $275 billion in tax cuts.

The goal is to advance the policies the president laid out in his campaign, including education improvement, health care cost reductions, moves toward energy independence and aid to low and middle income workers.

When passed, the legislation will require all business funding recipients to publish a plan for using the funds, along with purpose, cost, rationale, net job creation, and contact information about the plan to a new website Recovery.gov so that the public can review and comment.

About $275 billion is designated for tax cuts sent directly to the states to protect the jobs of firefighters, local government employees and public health workers as well as tax credits for education and first time homebuyers.

Job-creating road and bridge funds ($90 billion) will favor repairs to existing structures rather than funding new ones.  Repair jobs can be initialized faster, quickly injecting payroll spending into the economy, as well as curtailing urban sprawl leading to increased fuel consumption.

There will also be jobs created for clean energy development ($58 billion), a national electric grid, and funds to weatherize homes and public buildings.  It is hoped the recovery plan will spark energy efficient thinking and building as well as renewable energy technologies.

There is close to $142 billion allocated for education to protect the jobs of teachers as well as attempt to stop the “dropout crisis” and provide an easier path for many American youth to become productive taxpayers.  Studies have shown that cutting the dropout rates in half would pay back $9 for each $1 invested, representing new tax revenues and savings in welfare and incarcerations.

Funding will also go toward expanding wiring providers and implementing universal broadband service to extend Internet service to rural areas.  Internet access will allow companies to hire remote workers to work at home, saving on office expenses as well as allow individuals the opportunity to run small businesses on the Internet.  It will also be a vehicle for coordinating expanded health care records.  It is estimated that for each $1 invested in this area will return about $10 in increased productivity to the economy.

Health care investments ($111 billion) to the states to expand Medicaid will result in cost reductions connected to the medical industry’s expanded use of information technology.  The expanded use of technology to coordinate medical records ($20 billion) will minimize duplication, re-entering the same data, and “doctor shopping” for multiple issues of the same prescriptions.  On the negative side, this technology expansion has people concerned over privacy on a national network, but tight encryption methods are readily available.

President Obama’s election mandate, along with a party majority in Congress, presents him with an opportunity to spend and cut taxes more than any president in our history, with the possible exception of Franklin D. Roosevelt in the Great Depression. 

To highlight the momentum of the recovery proposal, we can compare it to the $16 billion stimulus Bill Clinton asked the Democratic-controlled Congress for in 1993 when he had just come into office, and they turned him down.

So far, this Congress has only cut out a $3,000 tax credit for businesses for each new hire.

The size of this package is annually nearly half as much as the total federal annual discretionary spending budget with the exception of Social Security, Medicare and Medicaid. 

The package is expected to be on the president’s desk by February 13, a scant three weeks after he took office.

He soon expects to sign legislation against gender pay discrimination (signed 1/29/2009) and for low-income child health care.  He has already issued an executive order removing the ban on federal abortion funding and expects to soon revive federal financing for embryonic stem-cell research.

Ed.Note: The Lilly Ledbetter Fair Play Act of 2009 was signed into law after passing both houses almost strictly along party lines.  The Republicans are acting like spoiled brats, voting against any Democratic legislation, no matter how it advances the causes of right and good for the country.  This was a vote by Republicans against Democrats, but it comes across as a vote against women and minority equality. 
I am ashamed of the Republican party.

President Obama will spend a lot of time himself lobbying for the passage of this bill.  He wants to go to the American people and report that this is a package passed by both parties in Congress.  However, Republican ‘nay Sayers’ claim this package will not work, so they are voting not to do anything with regard to government spending and have no positive suggestions of their own, except tax cuts.  The Republican approach is to offer tax cuts, and let the social economy recover and advance at a natural pace, a process that could take decades.

The package passed the both the House Appropriations committee and the committee on Ways and Means strictly along party lines and it is likely the bill will pass Congress along party lines as well.  This is another example of one Party driving while the other becomes a dragging anchor.

In addition to the $820 billion stimulus package, better known as the American Recovery and Reinvestment plan of 2009, the president will oversee the distribution of the second half of the $700 billion TARP program.  He has said he will have a strong message for bankers about sitting on any taxpayer bailout money, reminding them of their commitment to restart credit to both business and individual and work with struggling homeowners to avoid foreclosure.