The American Jobs Emergency Requires Action
Robert B. Reich

This is not a recovery. It's a continuing jobs emergency and it demands action.

Private employers added 50,000 jobs in November -- the smallest gain since January. More than 15 million Americans were jobless, not including those who are working part-time but would prefer to work full time, or a record 1.3 million who are too discouraged even to look for work.

Only 5 percent of those with college degrees are now unemployed, while more than 20 percent of everyone else is without work.

Maybe that's why Washington doesn't get it. The Washington echo chamber is filled with college degrees.

The Big Money economy on Wall Street and in corporate suites doesn't get it, either. They're doing marvelously well because they're tied to rapidly growing markets in China, India and Brazil. But the Average Worker economy on Main Street continues to wallow.

Let's be clear about the problem. It's an insufficient demand for workers.

There are only four sources of demand. The biggest source is American consumers, who comprise about 70 percent of economic activity.

But the vast American middle and working class can't and won't buy enough to get people back to work. They're still under a huge debt load.

Even if and when they pay it off, their buying days are gone. The Great Recession took away their last means of coping with years of stagnant wages -- going deeper into debt by using their homes as collateral. The housing bubble burst, and home prices continue to drop.

The second source of domestic demand is business. But businesses won't hire more workers without more customers. Supply-siders say businesses would start hiring if their taxes were lower. But businesses are sitting on almost a trillion dollars of cash. They don't need lower taxes in order to hire more Americans. They need more American customers.

The third source of domestic demand is net exports. But they're going nowhere. Although China, India and Brazil are buying goods and services from American companies -- and thereby boosting U.S. profits -- those U.S. companies are making most of what they sell there in those countries. GM is selling more cars in China than in the U.S. now, and manufacturing them in China.

That leaves the fourth source of domestic demand -- government. But it's not nearly filling the gap. To the contrary, state and local governments are broke, and they are cutting spending and raising taxes to the tune of more than $110 billion this year. The federal government's much-maligned stimulus is about gone (almost all economists believe it saved more than 3 million jobs).

The Federal Reserve is pumping $600 billion into the economy, but without an expansive fiscal policy this is only fueling speculation.

Instead, austerity and deficit reduction are the new buzzwords in Washington, as well as in Europe -- which is absurd given what's happening to the economy.

The answer isn't only to extend unemployment benefits, but to create a new WPA -- modeled after the WPA of the Great Depression -- to put jobless Americans to work. We also need a national infrastructure bank to rebuild our crumbling highways and water and sewer systems, thereby putting additional people back to work.

In addition, exempt the first $20,000 of income from the payroll tax, thereby putting more money into the pockets of lower-wage workers -- which they'll spend. We should extend the earned income tax credit, a wage subsidy, upward through the middle class, and reduce taxes on everyone up to $80,000 of income.

How to pay for this? Not in 70 years has so much of the nation's income been at the very top. Pay for all of this with a 2 percent surcharge on incomes between $1 million and $2 million, a 3 percent surcharge on incomes between $2 million and $5 million, and a 5 percent surcharge on all incomes over $5 million. Add in a .5 percent transaction tax on all financial transactions.

Our choice is either such reforms or continued economic stresses for millions of American families -- stresses that will translate into an ever angrier and more divisive politics.

We can't go back to the old "normal" of an unprecedented concentration of income and wealth at the top, because that old normal got us into the present fix.

The old normal undermines the purchasing power of the rest of America. It invites speculation on Wall Street. And it translates into extraordinary political power of a moneyed elite hell-bent on gaining even more power and wealth, and preventing the rest of America from flourishing.

But why would this moneyed elite ever agree? They'll agree when they understand this is a lousing strategy even for them.

Those at the top would do better with a smaller share of a booming economy that elicits a positive politics than they will do with an ever-larger share of an anemic economy that fuels the politics of anger.

They should convey this message to their bought-for representatives in Congress.

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of the new book "Aftershock: The Next Economy and America's Future."

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