To Reduce Unemployment, Pass New Trade Bills Soon, Published in the Centre Daily Times February 2011

The recent recession has turned many of us into armchair economists.  I’m often surprised to find myself reaching first for the business section of the paper instead of the sports, hoping to see that unemployment statistics are getting better. According to the Bureau of Labor Statistics (www.bls.gov) about 7.5 million Americans lost their jobs between 2007 and now, more than doubling the number of unemployed to 14.5 million.  Most of these folks were in the ‘goods producing’ sector, with the rest in supporting areas like trade and transportation and business services.  This decline in manufacturing and construction has actually been going on for a while now.  In 1979, over 1 in 4 employed Americans actually made and built things for a living.  Today, only about 1 in 8 do.  We’ve become a society of service providers, selling each other things (usually made in China), growing and serving each other food, and taking care of our aging baby boomer population.

While many large companies are starting to hire again, they’re doing so at an extremely cautious pace.  Small businesses, which employ about half of all private sector workers, are still struggling to hire as they try to get loans from stingy banks still smarting from their losses in the subprime home mortgage markets.  The direst employment projections are for state and local governments, which after the expiration of the 2008 and 2009 stimulus programs, are facing massive deficits.  Reluctant to raise taxes to balance the books, governors and mayors will soon be laying off hundreds of thousands of teachers, law enforcement officers, and other public servants.

What can the government do to resolve these issues?  While the president’s vision of an alternative energy-driven new economy is intriguing, it won’t lead to 7.5 million new jobs anytime soon. Besides, the days of stimulus are clearly over with Republicans controlling the House.  Reforming the corporate tax code might provide more incentives for businesses to hire, but that will take years to debate and implement.  The Republican mantra of reducing regulations?  Unlikely with Obama in the White House (and frankly, much of our industry needs regulating – let’s not forget the Gulf oil spill or the lost West Virginia miners too quickly).

While new job-creating federal policies are unlikely, there is another way to put Americans back to work, and that is to get our country back into the business of making things.  This means not just selling things to each other, but exporting more goods to other countries with newly well-heeled citizens, like China, South Korea, and India, as well as to South America.  We already export more stuff than any other country in the world (except for China), including a lot of airplanes and automobiles, pharmaceuticals, farm goods, and fuels.

Obama wants to double our exports within five years – a lofty goal, considering we export almost 1.3 trillion dollars in goods now.  It’s been done before, but typically over a ten year period, not five.  This is why trade agreements with South Korea, and with Panama and Columbia, are in the works.   Both parties in congress seem willing to debate, and hopefully pass these agreements.  The big jackpot, however, is China, with its newly wealthy behaving a bit like ours did in the 1950’s and 1960’s – all wanting their share of the new Chinese dream.  The President and congress need to find ways to carefully push our way further into these markets as soon as possible.

Stimulus II, published in the Centre Daily Times December 2010

Get ready for Stimulus II, also known as the “Two Year Bush Tax Cut Extension/One Year Social Security Tax Cut/One Year Unemployment Benefit Extension/Add your Favorite Congressional Deal Sweetener here” bill.  To both extend the Bush Tax Cuts temporarily and pass a second stimulus bill, President Obama has made a deal with the Devil (the Republicans), or so liberal Democrats would have you believe.

Most of us have seen the details in the papers – the compromise would dump almost 900 billion dollars into the economy over the next two years, most of it tax cuts and unemployment benefits.  Liberal democrats call this bill a sellout to the rich, and are threatening the president with retribution.  This doesn’t seem constructive, as the real debate should be about (1) whether the bill will actually stimulate the economy in a big way, as most conservatives believe, and (2) is the price tag (nearly a trillion dollars added to the deficit) worth it?

Extending unemployment benefits (about 60 billion) is a no-brainer.  The unemployed use their checks to pay their bills and shop for food, so the money goes directly into our economy.  The potential benefits of the Bush tax cut extension are less clear.  Low income families will use most of the cuts (460 billion) to continue buying goods and services.  The rub comes with the extensions for the wealthy (80 billion, plus 70 billion in estate, or ‘death’ tax reductions).  Economists are divided on whether this money is stimulative, or just goes into bank and trust fund accounts.  The one year Social Security tax reduction is intriguing, though, as it benefits the middle class the most.  But, will the middle class go on spending sprees in 2011 with this ‘rebate’, or will they pay down debt or save it?  I’m inclined to dump my cut (should the bill pass) into my daughter’s college fund, which isn’t very stimulative.

Why isn’t congress only passing the portions of this bill that are guaranteed to help the economy?  Because congress is full of politicians – nothing simple and straightforward happens there.  Republicans, who believe strongly in supply-side economics (money and prosperity flow downhill from wealthy companies and individuals), have tied unemployment benefits to extending the Bush tax cuts for the wealthy.  Also, our Senate has degraded to the point where only bills with supermajorities (60 votes or more) can pass, forcing compromise between the parties.

I am torn in many ways on this bill.  In spite of economists declaring the recent recession over, there are over 8 million people who lost their jobs in the recession still looking for work.  Consumer confidence remains stubbornly low.  More stimulus may be needed to nudge our economy to the point where it becomes self-sustaining.  However, our debt keeps growing, and borrowing more money than necessary to give rich folks tax breaks doesn’t seem like a great idea.

After much reflection, I’m inclined to support this bill, and caution liberal Democrats that recent polls seem to show that most Americans do as well.  The recent election is also a clear sign that Americans want compromise.  Trashing the rich and the president is not helpful for the country right now, and I encourage my liberal friends to save their anger for 2012, when we’ll all have this debate again, hopefully under better economic conditions.