The government probably could get us out of this mess.
One striking piece of data in the jobs numbers out Friday was just how much of a drag the public sector is on the lame economic recovery. While the private sector added 172,000 jobs in July; federal, state and local governments shed 9,000 jobs. Over the past three years, the government has eliminated 693,000 total jobs. The unemployment rate since the financial crisis has remained stubbornly high, rising to 8.3 percent in July, the Labor Department announced Friday.
Economists interviewed by The Huffington Post blamed the problem on the paralysis in Washington.
The government could have cut the unemployment rate to as low as 5 percent by now “if we had spent enough to do it,” said Dean Baker, co-director of the left-leaning Center for Economic and Policy Research. A government stimulus focused on hiring workers to repair infrastructure would be “the quickest way” to ease the jobs crisis, he said.
Baker said congressional Republicans supporting austerity are not the only ones to blame. President Barack Obama has not explained to the country why the economy is in crisis and how another stimulus would help. Baker pointed to President Franklin Delano Roosevelt, who explained the Great Depression and how to get out of it during his fireside chats on the radio.
“I don’t think [Obama's] really tried to do that, and in some ways he’s actually done the opposite,” Baker said. “Now, everyone’s got a TV, most people have the Internet. I just can’t believe that people would have a more difficult time grasping basic economic principles today than they did in the ’30s.”
Betsey Stevenson and Justin Wolfers, economics professors at the University of Michigan, noted in a recent Bloomberg View column that 92 percent of leading economists agree that the stimulus helped reduce the unemployment rate, according to a February poll conducted by the University of Chicago’s Booth School of Business. In July, Wolfers called Congress’ refusal to consider another stimulus “an enormous dereliction of duty.”
By blocking Obama’s jobs proposals, congressional Republicans are sabotaging the economy to win the 2012 election, said Daniel Altman, chief economist at Big Think and adjunct economics professor at New York University’s Stern School of Business. That is the thrust of his new book “Sabotage: How the Republican Party Crippled America’s Economic Recovery.”
Altman, who traditionally has hewed to the center in his research and writing, said he recently chose to take sides because “one side is just so wrong.”
“This was an economy trying to dig out of one of its deepest holes in a century,” Altman said. “An opportunity to keep millions of Americans unemployed and some even going hungry doesn’t come along every election.”
Altman pointed out that some congressional Republican leaders have admitted that infrastructure projects and reducing uncertainty would boost the economy, then turn around and create uncertainty and block infrastructure projects. For example, House Majority Leader Eric Cantor has asked for high-speed rail in his own district, while pushing for deep government budget cuts, Altman said.
State and local governments have been laying off tens of thousands of teachers, firemen, and emergency responders as the federal government’s 2009 stimulus has dried up. Meanwhile, it is cheaper for the federal government to borrow now than it ever has been.
As a result of government job cuts, some jobless ex-government workers have lost their savings and homes. Laid off firefighters have had to watch blazes engulf homes without being able to help. Waits have been getting longer for public transportation. And larger school class sizes have hampered children’s ability to learn.
Perhaps most importantly, economists said, the government has been withdrawing income instead of pumping it into the economy. Cutting off public-sector workers’ livelihoods means less spending by those former workers, which hurts those in the private sector.
“Can you imagine where Mitt Romney would be right now if the economy were booming?” Altman said. “Not only would he be a laughing stock, but he would have no issue to run on.”