The Middle Class — the foundation of American prosperity is eroding in full view says Jeff Madrick in Our Crisis of Bad Jobs.
Despite the reported drop in unemployment from 8.1% in August to 7.8 last month, President Obama is still taking heat for the slow economy. Black unemployment remains close to 14.8%.
Madrick writes that President Obama’s economic plan, while not ideal, will produce 1.4 million more jobs than Mitt Romney’s plan which will lose 2 million more American jobs over the next two years. Madrick believes…
Despite deficit concerns, robust action in the jobs market will be urgently needed to counter the growing problem of bad jobs over the next presidential term. Only by encouraging much faster growth through new stimulus and public investment will the government have a strong prospect of reversing the middle-class income crisis. The next steps should also include more direct intervention, such as higher minimum wages; aggressive wage subsidies; outright job creation through public programs in fields like construction and teaching; constraints on financial incentives to suppress wages by CEOs and Wall Street privatizers; and a significantly lower dollar, by keeping interest rates low, to improve exports and limit imports.
We are unlikely to see any of this even mentioned with the election only weeks away, and it is unclear how much political clout the president will have after November if he is reelected. It will depend not only on whether he wins but whether more Democrats are elected to Congress with him. Nevertheless, it should at least be clear to voters that President Obama’s proposals as they now stand will still add far more jobs in 2013 and 2014 than would Mitt Romney’s. Moreover, while falling short of what is needed, Obama’s general approach could be enhanced if the political environment changes.
Moderate tax increases for the wealthy are an effective way to raise revenue to reduce the deficit: they do not reduce GDP very much because the well-off don’t tend to cut much of their spending and have enough money to keep going. But direct spending by the government can have a big impact on GDP due to what’s known as the multiplier effect. Money is spent, winds up in the hands of consumers, who save some and spend more, and so on in a virtuous circle. With more sales, business hires more workers. If growth speeds up, a higher proportion should be for better-paying jobs, though this is not altogether clear any longer.
Mark Zandi, chief economist of Moody’s Analytics, has computed such multipliers for various kinds of spending, and the Economic Policy Institute (EPI) has determined that, based on these figures, Obama’s budget proposals would increase jobs by 1.1 million in 2013 and 280,000 jobs in 2014. In contrast, because Romney’s plan seems largely to consist almost entirely of tax cuts, the EPI estimates it will not have much impact on growth, adding fewer than 100,000 jobs in 2013. The size of these multipliers is also in dispute but EPI’s estimates, even if a bit high, are probably in the ballpark.
And if Romney cuts spending to pay for the tax cuts, as he has promised to do (but without revealing the details), it will devastate the economy, leading to 2 million more lost jobs over the next two years, according to EPI.
More at – Our Crisis of Bad Jobs by Jeff Madrick | NYRblog | The New York Review of Books.
This election is more than a clash of ideas and political philosophy, it is about the survival of American prosperity and the middle class. Mitt Romney’s plan does nothing to save the American middle class. Romney has gotten wealthy and stayed wealthy by sending American jobs overseas, sheltering his money in overseas Swiss bank accounts, and reducing his taxable income with Cayman Island tax shelters.
Knowledge is power. Read before you vote.