He had it right all along about the size of the stimulus package:
O.K., Thursday’s jobs report settles it. We’re going to need a bigger stimulus. But does the president know that?
Let’s do the math.
Since the recession began, the U.S. economy has lost 6 ½ million jobs — and as that grim employment report confirmed, it’s continuing to lose jobs at a rapid pace. Once you take into account the 100,000-plus new jobs that we need each month just to keep up with a growing population, we’re about 8 ½ million jobs in the hole.
And the deeper the hole gets, the harder it will be to dig ourselves out. The job figures weren’t the only bad news in Thursday’s report, which also showed wages stalling and possibly on the verge of outright decline. That’s a recipe for a descent into Japanese-style deflation, which is very difficult to reverse. Lost decade, anyone?
Wait — there’s more bad news: the fiscal crisis of the states. Unlike the federal government, states are required to run balanced budgets. And faced with a sharp drop in revenue, most states are preparing savage budget cuts, many of them at the expense of the most vulnerable. Aside from directly creating a great deal of misery, these cuts will depress the economy even further.
So what do we have to counter this scary prospect? We have the Obama stimulus plan, which aims to create 3 ½ million jobs by late next year. That’s much better than nothing, but it’s not remotely enough. And there doesn’t seem to be much else going on. Do you remember the administration’s plan to sharply reduce the rate of foreclosures, or its plan to get the banks lending again by taking toxic assets off their balance sheets? Neither do I.
All of this is depressingly familiar to anyone who has studied economic policy in the 1930s. Once again a Democratic president has pushed through job-creation policies that will mitigate the slump but aren’t aggressive enough to produce a full recovery. Once again much of the stimulus at the federal level is being undone by budget retrenchment at the state and local level.
So have we failed to learn from history, and are we, therefore, doomed to repeat it? Not necessarily — but it’s up to the president and his economic team to ensure that things are different this time. President Obama and his officials need to ramp up their efforts, starting with a plan to make the stimulus bigger.
Steve Clemons points out that the real unemployment rate is far higher than the 9.5% official figure for June:
Each month, I receive from Leo Hindery an update on “America’s effective unemployment rate” which includes not only the official unemployment figures but other data points showing off-the-books unemployed or underemployed people.
The numbers are staggering and are aggregates of official data. They matter because various Obama administration officials including the President himself started off calling for huge stimulus packages to help generate “jobs, jobs, jobs!”
Plus, points out Ezra Klein, “We’ve also got about 9 million workers who are part-time because they can’t find full-time work. That’s up from 5 million workers in June.”
MSNBC’s First Read blog has a few details Republicans are forgetting ignoring in their stampede to call the stimulus package a failure.
Here is Paul Krugman again on why a much larger stimulus package back in January would have helped prevent what we’re seeing now:
It has been a rude shock to see so many economists with good reputations recycling old fallacies — like the claim that any rise in government spending automatically displaces an equal amount of private spending, even when there is mass unemployment — and lending their names to grossly exaggerated claims about the evils of short-run budget deficits. (Right now the risks associated with additional debt are much less than the risks associated with failing to give the economy adequate support.)
Also, as in the 1930s, the opponents of action are peddling scare stories about inflation even as deflation looms.
So getting another round of stimulus will be difficult. But it’s essential.
Obama administration economists understand the stakes. Indeed, just a few weeks ago, Christina Romer, the chairwoman of the Council of Economic Advisers, published an article on the “lessons of 1937” — the year that F.D.R. gave in to the deficit and inflation hawks, with disastrous consequences both for the economy and for his political agenda.
What I don’t know is whether the administration has faced up to the inadequacy of what it has done so far.
One sector of the economy continues to do well:
Meanwhile, Wall Street payouts are not dropping. They are, in fact, expected to exceed last year’s average. According to The Wall Street Journal, Goldman Sachs will be shelling out a whopping $20 billion (or $700,00 per employee) while Morgan Stanley’s payouts are expected to exceed last year’s packages, reaching an average $340,000.
Goldman Sachs and the other Wall Street elites are thus continuing down the same path of profiting handsomely off the mess they’ve created, and laughing (at the taxpayers) all the way to the, uh, bank.