Quick Action Needed to Restore Economy
Fifth of a Series
This is the fifth of a series in which Moore County’s Republican and Democratic party chairmen will address various political issues. Today's issue is the economy. Jim Heim is chairman of the Moore County Democratic Party. Robert M. Levy is chairman of the Moore County Republican Party. Click here for Levy's take on the issue.
America is in crisis. We are in the midst of the worst financial emergency since the Great Depression.
The only way out is to create millions of jobs to put Americans back to work. And the only way to create those jobs is to spur consumer demand. Yet the steps taken so far have been tentative and shown only meager effectiveness.
Our economy is based on consumers. More than 70 percent of our gross domestic product comes from consumer spending. Without it, our economy would collapse. Most of that spending comes from working Americans. As workers lose their jobs, consumer spending diminishes, rents and mortgages don't get paid, the problems mount, and the cycle repeats.
The jobs picture is bleaker than most realize. The currently unemployed are having a tough time finding that next job. As their period of unemployment - already much longer than ever recorded - drags out for months and years, their job skills fade and the task can become insurmountable.
Millions of formerly hard-working Americans may never find jobs. And some employers are trying to take advantage of the unemployed by offering jobs at dramatically reduced wages.
At present, one in six Americans is out of work. But the pain is not felt uniformly. Among college graduates, the rate is 5 percent, for high school grads it's 10 percent, for African-American men it's 18 percent, and for teenagers it's a whopping 26 percent.
That last number is troubling because it means that large numbers of young people are being deprived of the opportunity to develop a work ethic and job skills to build on for their future, productive years.
Faced with a crisis that threatens the country's very future, one would expect dramatic steps to be taken, but that's not happening.
In the 1930s, faced with a similar situation, the president and Congress worked aggressively to restore the economy and the jobs that went with it. But in those days Republicans and Democrats were willing to work together to save the nation.
Now we have Republicans who are willing to risk everything in hopes of shifting the blame away from their failed policies and to gain an electoral advantage. We have Blue Dog Democrats willing to help them, resulting in a paralysis at the worst time possible.
What can be done? First, allow the Bush tax cuts to expire on schedule at the end of the year for taxable incomes above $250,000. Those tax cuts have been a drag on the economy, returning only 29 cents on the dollar (according to Moody's). Enact a "payroll tax holiday" on the first $20,000 of income until unemployment rates come down, which would generate $1.29 in economic activity per dollar spent.
Unemployment benefits ($1.64 return) must be extended as needed, and food stamps (now called the Supplemental Nutrition Assistance Program, or SNAP) must be made more available; this returns $1.73. These latter efforts are the most efficient stimulus programs, as most of the money is immediately returned to the economy for family necessities.
State governments are facing $69 billion in shortfalls and need help to avert even more job losses.
We need a new WPA to put the unemployed back to work. It makes little sense to have millions of workers idle when the nation's infrastructure is in such disrepair.
We must address the issue of jobs being sent overseas. It is -difficult to compete with workers making a dollar an hour. Without carefully considered tariffs and other restrictions, our job -situation will worsen. And the Federal Reserve needs to remember its other mission; besides controlling inflation, the Fed is charged with encouraging full employment. It's time for it to get engaged.
Most important, the president needs to ignore the deficit hawks and act boldly. In 1936, FDR cut spending in the face of demands by Republicans frightened of deficits. It was the wrong thing to do, and unemployment went up, undoing much that had been accomplished, delaying the nation's recovery. We cannot make that mistake again.
If the government scales back its spending now, we will see rising unemployment and a return to recession next year. And it could get worse. Economists are worried that we're on the verge of a long deflationary period, which would feed on itself and make recovery even more difficult and costly. Putting Americans back to work is the only solution.
The Democratic Party is the party of working Americans. Since the Great Depression, every Democratic president (except for Carter) has seen a larger increase in GDP than every Republican president (except for Reagan). The stock market follows a similar pattern, as does employment.
More than 22 million jobs were created during Bill Clinton's two terms. George W. Bush saw only a million. Democratic emphasis on economic growth for the middle class enhances the living standards for Americans at every level.
We're in a deep hole and must let our elected representatives know that we expect prompt, serious measures to restore the economy. Both parties have a responsibility to do what must be done to put Americans back to work. America's future economic success depends on it.
Jim Heim is chairman of the Moore County Democratic Party. Contact him at firstname.lastname@example.org.
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