[Robert Reich] Jobs bill needed to stop double-dip

Republicans repeatedly assured the nation that once the debt-limit deal was done ― capping spending, cutting the budget deficit, and getting “98 percent” of what they wanted, according to House Speaker John Boehner ― the economy would bounce back.

Guess what? Just the opposite seems to be happening. The stock market has plunged, Standard & Poor’s has downgraded the nation’s debt, and America seems closer than ever to falling into another recession.

Wall Street investors aren’t ideologues. They don’t obsess about budget deficits 10 years from now or the size of the government. Their worries are based on cold, hard facts.

The first fact is the economy is almost at a standstill. The Commerce Department reports almost no growth in the first half of the year.

The second fact is the job situation is growing worse. Although the recent job report showed 117,000 jobs were added in July, that’s nothing to celebrate. At least 125,000 new jobs are needed every month just to keep up with population growth. This means even more people have stopped looking for work.

The real news from the recent job report is the stunning drop in the percent of working-age Americans now in the labor force. The labor participation rate is only 63.9 percent. That’s lower than it was at the bottom of the Great Recession ― lower than it’s been in almost three decades. Millions of American families that depend on two incomes to pay their bills now have only one. They’re not going to spend more to keep the economy going.

The third fact is that the recent budget deal makes it much harder for the president and Democrats to enact a jobs bill that counteracts these trends and boosts the economy. Because the deal sharply reduces spending, Congress can’t get close to the size of a stimulus necessary to bridge the gap between what increasingly scared consumers are willing to spend and what the economy can produce at or near full employment.

Meanwhile, the original stimulus is over, as is the Fed’s “quantitative easing.” The market is now on its own ― without enough rocket power to get out of the continuing gravitational pull of the Great Recession.

Republicans continue to claim the original stimulus didn’t work, and that there’s no point in another. But their argument is belied by the Commerce Department’s revised data for what happened to the economy in 2008 and 2009 ― which shows the drop to have been far greater than had been supposed.

We now know the economy plunged 8.9 percent in the fourth quarter of 2008 ― the steepest quarterly decline in more than half a century. And in 2009, household buying declined almost 2 percent (compared with a previous estimate of 1.2 percent). That’s the biggest contraction in almost 60 years.

The original stimulus did work. It saved 3 million jobs. It was just way too small to offset the drop. With cash-starved state and local governments simultaneously scaling back their own spending, the federal stimulus needed to be even bigger to have any effect.

So we’re now poised on the edge of a double-dip ― and the federal government has its hands tied behind its back because of a phony debt crisis and a misleading view that the first stimulus failed.

The only hope is voters will tell their members of Congress ― who are now on recess back home ― to stop obsessing about future budget deficits and get to work on the real crisis of unemployment, falling wages and no growth. Demand a bold jobs bill to restart the economy.

What to do? This isn’t rocket science. Recreate the WPA and the Civilian Conservation Corps. Eliminate payroll taxes on the first $20,000 of income for two years. Expand the Earned Income Tax Credit. Lend money to cash-strapped states and local governments. Give employers tax credits for net new jobs. Amend the bankruptcy laws to allow distressed homeowners to declare bankruptcy on their primary residence. Extend unemployment insurance. Provide partial unemployment benefits to people who have lost part-time jobs. Create an infrastructure bank to borrow directly from global capital markets and finance new roads, bridges, ports and rapid transit.

And more.

Yes, any such initiatives will require more public spending in the near future. But that spending won’t worsen the long-term budget debt if it restores jobs and growth ― thereby reducing nation’s debt as a percent of the total economy. People with jobs and businesses with sales pay taxes.

People without jobs and businesses without sales don’t.

A jobs bill should be number one on the nation’s agenda. It should have been number one all along.

By Robert Reich

Robert Reich, former U.S. secretary of labor, is a professor of public policy at the University of California at Berkeley and the author of “Aftershock: The Next Economy and America’s Future.” ― Ed.

(Tribune Media Services)