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By Jose Rodriguez
The non-partisan Congressional Budget Office, out of 11 potential options for Congress, rated unemployment extension as the most likely to stimulate the economy. The least likely: extending the Bush tax cuts, especially for the wealthy. Furthermore, the CBO estimates that every dollar spent on unemployment benefits will generate up to $1.90 in economic activity. Others, such as the Labor Department, argue that there is $2.00 worth of economic activity for every spent dollar. It is a basic fact that people who are unemployed spend every dollar in unemployment insurance that they receive, which fuels economic activity. Conversely, tax cuts for the rich tend to only generate somewhere between 10 and 40 cents of economic activity for every dollar, because the rich tend to save their money, not spend it.
Not extending unemployment benefits would have a deleterious impact on the already slow pace of economic recovery. With current low demand and excess supply, failure to extend unemployment benefits would further contract the economy and make it even more difficult for employers to hire new workers. The CBO estimates that the economy could see a 1% decline in GDP growth and up to one million additional people could lose their jobs. It goes without saying that we would have hundreds of thousands of people fall into poverty. A recent report by the Census Bureau found that over one out of three people cannot “make ends meet” at a basic level. Not extending unemployment insurance to Americans suffering from unemployment during the worst economic crisis since the Great Depression would be a moral outrage.
The suggestion, posited by many conservatives, that people are simply too lazy to get a job would be laughable were it not so incredibly offensive. The Bureau of Labor Statistics released a report last August that indicated that there were five job seekers for every job listing. More specifically, there were 14.6 million people who were unemployed, but only 2.9 million job openings. Those numbers have shifted somewhat in recent months, but the ratio is constant. The misconception that the unemployed are simply lazy reflects a world view that suggests Americans are spoiled and feel entitled. The reality, in this economic crisis, is that Americans are struggling to keep their heads above water. They are struggling to survive. So, the notion that cutting off aid to lazy, spoiled Americans will get them back to work is completely false. Americans want to work, but there are simply not enough jobs.
The American economy is a consumer driven economy. And right now, Americans do not have the money to consume as much as they used to, which has driven demand downward. Now, corporations are sitting on $1.8 trillion. They claim that they have not invested that money for two reasons: there are excess supplies of goods, so there is no need to invest; and their confidence in the economic outlook is keeping them from making any risks in future investments. Others, such as myself, believe that there is a political dynamic, as well. Corporate America has not been happy with the Obama administration’s attempts to regulate the economy, or his desire to end the Bush tax cuts for the rich. Under President Bush, regulations were ignored, regulators were in bed (in some cases literally) with the people they were supposed to be monitoring, and corporations could count on President Bush to side with them. Fareed Zakaria, in a Washington Post column, made this case, as well. In discussions with business leaders, he found that most of them complained more about President Obama than their economic or financial concerns. He found that most of them felt similarly: “… [President Obama] has almost no private-sector experience, that he’s made clear he thinks government and nonprofit work are superior to the private sector. It all added up to a profound sense of distrust.”
It is an agreed fact that during periods of economic booms generous unemployment benefits reduce the incentives for people to find employment. However, we are not currently in a period of economic success. We are crawling out of the bowels of an economic crash. In 2003, in testimony before the Joint Economic Committee, Alan Greenspan made comments about unemployment benefits which can be applied to today’s debate about the issue: “Unemployment insurance is essentially restrictive because it’s been our perception that we don’t want to create incentives for people not to take jobs. But when you’re in a period of job weakness, where it is not a choice on the part of people whether they’re employed or unemployed, then obviously you want to be temporarily generous. We ought to be temporarily generous. And I think that’s what we have done in the past and it has worked well. […]I think that because it is stringent in normal periods, that one should recognize that people who lose jobs not because they did anything and can’t find new ones, you have a different form of problem, which means that you have to allow the unemployment system to be much broader and, indeed, that’s what we need to do.” People who now find themselves unemployed through no fault of their own should not be left out to dry. Not only is it morally indefensible, it is economically unsound.
Everyone, take a deep breath.
Chill the fuck out.
I understand the furor over the AIG bonuses. Not only do they go “against our most basic sense of what’s fair, what’s right, it offends our values,” but they also are symptomatic of a system in serious need of fundamental change. And everyone is outraged over them, from the President right on down to the homeless guy out in front of the McDonalds by where I work.
But are we so “outraged” that we are losing sight of the big picture?
Afterall, the bonuses, though outrageous and boneheaded, are really an insignificant piece of the bailout money they’ve recived. The $165 million in bonuses is only one-tenth of one percent of the $180 billion they recieved in bailout money.
Don’t believe me? Well, I’ve never been great at math, but I’m sure that it works out like this:
$165,000,000/$180,000,000,000 = .0009166
The psuedo-populist rage that exists now originated with the Republican party, eager to shift blame onto President Barack Obama. When President Clinton left office, the national debt stood at $5.73 billion; when President Bush left office, the national debt stood at $10.66 billion. Not only did he double the national debt, but he also accumulated more debt than any President in American history. Some analysts predicted before the current fallout that the national debt would rise to as much as $2 trillion dollars. With President Obama’s stimulus packge and soon-to-be budget those figures are going to rise dramatically.
The GOP is trying to take advantage of American’s collective amnesia. So far, unfortunately, it is working. The party that is now screaming at President Obama to be fiscally responsible was the party, over the last eight years, that spent money like it was going out of style. President Bush did not even use his veto-power until the Democrats came into power in 2007. The sage Alan Greenspan, who recently stated that he was wrong to believe that the financial institutions would self-regulate, also famously admitted, in his book Age of Turbulence, that he had been angered by the Republican’s attitude that “deficts don’t matter.” His advice to President Bush, just as it was under President Reagan, to exercise fiscal responsibility was completely ignored. This attitude not only caused him to leave his position as Federal Reserve Chairman, but it also caused him some measure of happiness when the Republicans were swept out of power. To the surprise of many, this long-time Republican wrote that President Clinton (a Democrat) was far more fiscally conservative than any of the six presidents he worked under, and that he appreciated Clinton’s efforts to slash deficits and reduce the national debt.
Now, let’s turn the clock back to 1993…
President Clinton was putting together a budget hat would increase taxes on th rich, spend more money on important programs, and cut the budgets of programs that were not working. So called fiscal conservatives were outraged by President Clinton’s “tax and spend” budget, but what they missed was the fact that he was implementing short-term growth, but he was also preparing for long-term sustainability of that growth. That is exactly what is happening now under President Obama. Yes, he’s having to spend a lot of money, but he is also investing in long-term growth that will raise the American economy out of the depths of this recession.
But I’m geting ahead of myself.
The AIG bonuses have distracted people from the overall picture. The American public, thanks to the GOP and the “Pro-Obama” media, have been worked up into a frenzy over a semi-irritating story.
The reality is that the bonuses were included in the original bailout deal that was worked out in November 2008… wait… who was President in November?
Oh, yeah! Bush!
Within the original bailout agreement, AIG was allowed to payout retention bonuses to its prized employees, which initially totaled $469 milion (according to an SEC filing by AIG). In a November 2008 HuffingtonPost blog by Representative Elijah Cummings (A Bonus by Any Other Name Still Stinks), he wrote that “the company’s executives will be receiving ‘cash awards’ as ‘retention payments.’ AIG can dress this money up in fancy names, but no one is fooled. A bonus by any other name still stinks.” So, clearly, this was not a process that was clandestine or otherwise kept from the public. And, again, this was known before President Obama came into office.
The public, as usual, was not paying attention.
And, again, the public is not paying attention. They are distracted by their own “outrage” over the AIG bonuses. And President Obama is reaping all the blame that belongs to President Bush and the GOP.
Well, maybe he is partly to blame…
In February, as the Stimulis Bill was making its way through congress, an amendment was added to the bill which would allow companies that recieved bailout money to provide bonuses to “valuable” employees. According to Senator Chris Dodd (D-Conn), Treasury officials came to him and insisted that he insert the amendment into the Stimulus bill. Apparently, the move was an effort to prevent lawsuits against the government from employees who were contractually promised bonuses. As Rep. Cummings noted, their bonus is keeping their job.
The President, who may or may not have been aware of the added amendment, has also expressed “outrage,” yet he has urged Americans to keep their eyes on the big picture. The bonuses, he remarked, though distateful, are an unfortunate and neccessary pill to swallow.
Just tonight, in fact, the Congress has passed a bill which places a 90% tax on those individuals that recieved bonuses. President Obama has indicated that he will not sign the bill. Secretary Treasury Tim Geithner has also said that he will deduct $165 million from the already planned additional $30 billion going to AIG.
Hopefully, this story loses its legs soon. Its nothing more than a distraction and an attempt to bring down President Obama’s numbers, which are still high. According to Gallup, President Obama enjoys a 65% approval rating, despite the gloomy economy and the furor over the AIG scandals of late. The American public, despite GOP efforts, still trust President Obama and still have a lot of hope for his presidency.
As President Obama said during his 60 Minutes interview, he is feeling the heat, as many bad choices made over the last few years (before he was President) are forcing him to make decisions that narrow down to “bad and worse”. He, nonetheless, continues to be steady, confident, and eloquent in his ability to convey his message to the American public. In the last week, he spent two days in California– a visit that included a stop on the Jay Leno show. Tonight the 60 Minutes interview airs, and later in the week he will make a televised appeal to the American people in order to rally support for his budget. This generation’s “Great Communicator” has a lot of explaining to do.