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It’s Time to End Unemployment As We Know It

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Congress has coughed up seven-hundred billion dollars so far to cover the bad bets made by the high-rolling denizens of Wall Street. Henry Paulson and Ben Bernanke have managed to scrape up a few hundred billion more here and there to shore up and bail out companies they deemed to be “too big to fail.” Despite the infusion of this tsunami of taxpayer and governmental largess, the stock market is still in free fall because investors realize that we are in the early stages of a recession that threatens to become a second Great Depression. The actions taken by Congress and the present administration address the effects and the most proximate cause of the current financial crisis (the dramatic increase in the number of bankruptcies and foreclosures), but do very little to address the root cause – job loss.

Now, in an attempt to address public anger related to The Great Wall Street Rescue Mission, there is discussion among our elected representatives about cutting taxes or sending out another round of stimulus checks. While these measures may enable over-extended debtors to make ends meet, or credit-starved consumers to go on one last spending spree, we need to realize that we can not consume our way out of a crisis that was created, in large part, by over-consumption. We need to work our way out. We need to put a solid foundation under our economy by putting every able-bodied worker to work.

The loss of jobs due to outsourcing, downsizing, and a faltering economy was the first domino to fall in the present financial crisis. Putting people back to work will reduce the number of foreclosures and give newly employed workers the means necessary to rent or purchase some of the houses that are now sitting empty. The private sector is not going to create jobs in the face of a serious, possibly long-term, downturn in our economy. The government is going to have to step in, as it did during The Great Depression, if we hope to reverse the downward spiral of job losses and avoid a serious recession.

In an essay in Newsweek George Will quotes, approvingly, the response of a fictional Republican candidate for president on NBC’s “The West Wing” to the question “How many jobs will you create?” His response: “None. Entrepreneurs create jobs, businesses create jobs. The president’s job is to get out of the way.”

It is true that entrepreneurs and businesses create jobs when they believe that economic conditions are such that they will realize a reasonable profit from starting or expanding a business. On the other hand, when economic conditions lead them to experience or expect lower profits, or monetary losses instead of capital gains, businesses don’t create jobs, they shed them. Working with Congress, a president in such a situation should take up the slack and find meaningful employment for people who are unable to find work on their own.

In the Capitalist Bible (more commonly known as An Inquiry into the Nature and Causes of The Wealth of Nations) Adam Smith prescribed a laissez-faire approach to the economy on the part of the government because he felt that workers would, if left alone by the government, do whatever work would create the most wealth for themselves. Collectively, this would lead to the greatest possible accumulation of wealth within a nation.

Smith wrote at the dawn of the Industrial Revolution. When Wealth of Nations was published (1776) 97% of the people in the United States lived and worked on farms and produced nearly everything they needed themselves. A person’s standard of living was tied directly to how hard he or she worked and nearly everyone was “self-employed.”

In the wake of the Industrial Revolution, mechanization, along with the principle of division of labor, and the specialization that results from it, have made us highly inter-dependent. Very few people are self-sufficient or self-employed. We are highly dependent upon the business community, both large corporations and smaller businesses, to provide employment. When young adults leave school and enter the work force, or older workers are laid off, most of them think in terms of “finding a job.” Very few think in terms of starting a business. We look to existing businesses to provide employment for us, but business owners and managers are driven by the profit motive, creating and providing jobs is simply a by-product.

Adam Smith’s famous “invisible hand,” its movements dictated by the immutable laws of supply and demand, takes away jobs as readily as it creates them. Markets operate quite efficiently for those involved, while leaving any number of people out of work. At the present time, as the prospects for profit dim for most industries, more and more people are finding themselves out of work and unable to find work. The downward spiral of recession has begun.

As George Santayana famously remarked, “Those who cannot remember the past are condemned to repeat it.” We keep hearing that this is “the worst financial crisis since the Great Depression” and yet our political leaders don’t seem to remember the curative power of alphabet soup. The various jobs programs of the “New Deal” (the WPA, PWA, and CCC) were quite effective in ameliorating the effects of The Great Depression and eased the suffering of millions of people in the bargain.

Franklin Roosevelt never fully bought into Keynesian economics and his jobs programs stopped short of achieving full employment. As a result, economic conditions improved, but it took our entry into World War Two to finally put an end to both joblessness and The Great Depression.

After the war Congress, worried that unemployment resulting from the shift back to a peacetime economy would send our economy back into a depression, passed the Employment Act of 1946 (typically referred to as “The Full Employment Act”) which stated that “it is the continuing policy and responsibility of the Federal government to use all practicable means . . . to foster and promote . . . useful employment opportunities, including self-employment, for those able, willing, and seeking to work.” Right there, in a bill passed by the seventy-ninth Congress and signed into law by President Truman over sixty years ago, is the key to an effective and equitable solution to our current economic crisis.

The “Full Employment Act” stopped short of guaranteeing everyone a job. That would require making the government the employer of last resort. It’s time to take that step. To paraphrase the welfare reform of the 1990s, we need to end unemployment as we know it. Paying able-bodied workers to sit home and do nothing when there is work to be done is inexcusable. It robs the workers of their dignity and shortchanges taxpayers in the bargain.

According to the latest report from the Bureau of Labor Statistics, 9.5 million people were unemployed nation-wide in September of 2008. For less than half the amount authorized to bail out Wall Street and financial institutions we could put every one of those unemployed people to work for a year at wages or salaries averaging $35,000.

A few members of Congress, including Senator Obama, have mentioned putting people to work on infrastructure and energy-related projects. There is a clear need for some public works projects to be undertaken at the present time. Our nation has a crumbling, outdated infrastructure and a dire need to implement an energy policy that includes speeding the development of new sources of energy.

Our government can reduce unemployment significantly by simply putting people to work on these projects that desperately need to be done, but we need to move beyond these obvious examples and develop a much broader range of opportunities to provide meaningful employment for those unable to find jobs on their own. Even the standard example, often given as a criticism of “make work” projects – digging holes in the morning and filling them up in the afternoon – could be made meaningful today if we combat global warming by having the workers involved plant a tree in between the digging and the filling in of the hole.

Putting people to work will increase our GDP and give taxpayers some benefit in return for their money. Achieving, or even approaching, full employment will pay for itself, at least in part, by leading directly to reduced pay-outs for unemployment benefits and other forms of welfare. There is plenty of work to be done. It’s time to limit the size of the cast of “American Idle” to those who are truly unable to work.

Putting people to work is the key to avoiding a deep and lengthy recession and helping individuals turn their financial fortunes back in a positive direction. Given jobs that pay a decent wage, many of the individuals who are in over their heads financially could eventually work their way out of debt and hold onto their homes, or a less expensive home, in the bargain. People who have already gone bankrupt, or lost their home, as a result of job loss will reenter the market to buy or rent a house when they find work. Slowing the tidal wave of foreclosures and increasing the demand for housing will halt the erosion in the value of houses, which will stabilize the value of the mortgage-backed securities (“collateralized debt obligations”) whose decline in value triggered the present financial crisis.

Creating jobs and adjusting the terms of mortgages held by homeowners who are capable of paying off a mortgage if the terms are renegotiated will take more time and effort than simply buying up the “bad paper” Wall Street has generated, but working from the bottom up in these ways is a more effective and a more equitable means of avoiding a second Great Depression than bailing out the fat cats and hoping some of the benefits trickle down. The belatedly risk-averse gamblers who have converted Wall Street into a casino can then decide for themselves whether they should sell out now at fire-sale prices or give the “buy and hold” strategy a chance to work.

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About Winston Apple

Winston Apple is the author of "Edutopia: A Manifesto for the Reform of Public Education." He is a former teacher. He has a Masters Degree in Curriculum and Instruction from the University of Missouri at Kansas City (1990). He is also a singer-songwriter and recording artist.
  • Mooja

    I’d hate to be the person trying to run a business competing against those government funded jobs. Hasn’t the construction sector been hit hard enough by the housing down-cycle?

  • Cannonshop

    Hmmm…

    Instead of government “Inventing makework”, maybe dumping money into the SBA might be a good start-and focusing it on areas that the U.S. is in shortfall.

    For instance…oh, funding small businesses that intend to explore for oil, mine coal, and build power-plants. Not big-money enterprises run by T.Boone and the boys, but smaller outfits, putting guarantees on short-term loans to existing small companies and existing small businesses outside the “Service Sector” could help too, dumping the punitive “Luxury Tax” that killed the smaller boat-builders and almost killed General Aviation manufacturers, funds to help competent people start up regional air or transport service in remote areas, Re-opening the vast stretches of our 49th state to settlement and development, providing guarantees and assistance to small companies that conduct “Basic” research (to take some, most, or all of the load off of Universities), providing capital and assistance to inventors to bring products to market, venture capital for start-ups…

    There is a constitutional place for government providing assistance to “Useful arts and sciences”, this doesn’t mean pictures of urine-jars and the like, nor does it mean tossing off grants to guys like Ward Churchill and Bill Ayers.

    Find the shortfalls in our economy, the potholes, and the blocks arrayed against things that are actually of use to the citizens, and fill those potholes and smash those roadblocks, and you’ll put folks to work. Handing out a cheque for standing in the rain with a sign isn’t it, nor is providing government cash to multinational multimillionaires and Political Action Committees.

    (though it would be interesting to see what Burt Rutan could do with even a tenth the budget that NASA wastes…)

  • Franco

    “Working with Congress, a president in such a situation should take up the slack and find meaningful employment for people who are unable to find work on their own.

    When jobs are for shit in the free market ecconomy and people can go over to the goverment for jobs. Who and what pays for all that?

    And tell me one thing that the free market can’t do better and more effiecet the goverment, including the US post Office which runs as effect as the govermental department ever has. FedEx, DHL, and others kick their ass here to breakfast.

    Are you getting the sence that your idea may just be going in the wrong direction.

    People creat jobs through there dreams, efforts and energies in free pursute for a better life, liberth and happyness (property).

    The govenments job responsalbity is to protect those rights for each of us and not a hell of a lot more.

    You want government to get bigger, when government can not do anything half as good or as efficent as the free market.

    our rights to make jobs and work in ourand

  • Cannonshop

    AS we are saddled with a bloated load of tax-fattened hyenas, Franco, it is meet to recall that we have never seen government get smaller-it merely changes shape and has periods of slower growth relative to its periods of faster growth.

    Those within government will always work their hardest to expand it, and as this is a general rule-even in GOP administration years (not to forget when the GOP controls the Congress as well), and as yet no attempted Third Party has amassed sufficient motion and inertia to truly challenge this status quo (the Perot people got closest, but were betrayed-Ross was running to get Bill elected, and took a lot of idealistic folks to the cleaners that way), it may be of some use to consider how one might incrementally nudge this self-perpetuating tumour on the ass of America into actually serving the interests of…Americans?

    We got here by incrementalism-that is, by small nudges and soft manipulations. Getting out again isn’t going to be done in four years, or eight, or twenty-but first steps might be to remind our governing criminals that they already have agencies existing, that those agencies may be influenced to actually serve their existing intended purposes (The SBA was intended to help people become Entreprenuers and in that way stimulate the economy into something resembling prosperity, for example, or how the Dept. of Homeland Security was created to do what the NSA was created to do, more than forty years prior!)

    The ends which the Original Poster seems inclined (that is, using tax money to create jobs), his long-term stated intent (putting people to work) is best served by using that money to push more americans into starting and running successful businesses. Since “Service Economies” don’t work long-term (eventually, your phone-line tech support types can be outsourced offshore, for example) and wealth is created by PRODUCTION (which is drastically different from, say, ‘raising social consciousness’ or washing one another’s socks until there’s no sock left), and as there’s a limit to how many cups of coffee you can sell to other coffee sellers, perhaps (maybe) encouraging small businesses in areas that generate real jobs (small manufacturing, wildcatting energy sources, local-base shipping and the like) may turn actual useful results where hiring people on the government dime to stand with a shovel and a stop-sign by the side of the road simply won’t.

    Since we’re stuck with the eighteen thousand pages of Tax code nobody understands, (and it isn’t going to shrink no matter WHO is in congress), it may be of some use to amend that garganuan mess to encourage what industries we have remaining in this country to use less outsourced-offshore in their supply chain-cutting the cost of doing business in America will reduce the ‘carrot’ AND the ‘stick’ that has been driving jobs overseas. Adding ‘carrot’ for new business to compete with offshore suppliers (and a competitive environment IS ‘carrot’ for lowering costs to customers) is true help for the working ‘class’ as Democrats put it.

    Cut the taxes for firms that move suppliers stateside, provide incentives for start-ups to take advantage of those tax-cuts, loosen access to raw-materials and harvestable energy sources domestically, and do all of this with the minimum of fuss and paperwork possible, and you have a long-term economic stimulus that doesn’t rely on a continuous flow of money from Uncle Sugar (taxpayers), while at the same time, you’re also encouraging a competitive marketplace at home and reducing the influence of monopolists and limited monopolies-which in turn provides higher quality goods to more people at lower prices, and more and higher paying jobs without State Demands (such as Ever-increasing minimum wages in a shrinking job market, the current state of affairs in too many U.S. States.)

  • troll

    Cannonshop – what consequences will follow from your proposed protectionism and market distortions do you suppose – ?

    peace and prosperity – ?

    as a proud member of the petite bourgeoisie my long term interests coincide with those of international labor and the poor of the world rather than those of ‘US’ capitalists

    Winston – unemployment and commodity production …(breaking into song and soft-shoe)…’go together like love and marriage’

    prediction: bet on the growth of the ‘black market’

  • Cindy D

    People creat jobs through there dreams, efforts and energies in free pursute for a better life, liberth and happyness (property).

    And then Wal-Mart comes to town causes those dreamers to close up shop.

    Some of the Waltons are America’s richest people. Do they create jobs or do they mostly break even with the job losses they cause? How do they effect wages employing two million people?

    If we raise their taxes are they going to create more jobs and pay better?

    These are some of the questions I have regarding how many jobs the wealthiest 5% of American create. And whether they will create more or less depending upon their taxes being decreased or increased.

    Reference: Job Creation or Destruction? Labor Market Effects of Wal-Mart Expansion (Abstract)

    The research literature on Wal-Mart: Some frowns, some smiley faces I guess smiley faces are indicated by the few studies that suggest the “Wal-Mart Effect” is mostly harmless.

  • Cindy D

    # 6 Correction: “If we raise their taxes are they going to create more jobs and pay better?”

    Should read: If we lower their taxes are they going to create more jobs and pay better? If we raise their taxes will this have the opposite effect?

  • http://drdreadful.blogspot.com Dr Dreadful

    Cannonshop @ #2: though it would be interesting to see what Burt Rutan could do with even a tenth the budget that NASA wastes…

    Quoted for truth.

    Despite all the hoopla about NASA’s project to return to the Moon by… when was it, the year 3000?… I fully expect that numerous organizations, including the Chinese, Indian and Japanese space agencies and several private companies, will beat them to it.

  • bliffle

    Cannon says:

    “Instead of government “Inventing makework”, maybe dumping money into the SBA might be a good start-and focusing it on areas that the U.S. is in shortfall.

    For instance…oh, funding small businesses that intend to explore for oil, mine coal, and build power-plants. ”

    Well, the SBA is probably better than Big Business, but is politically impossible, of course, because it is within politics that Big Biz clobbers small biz. The SBA is treated like a poor relative by almost every administration.

    We already are way over-capacity in the US industrial world. there is no need to stimulate those businesses, whether they be large or small.

    What we need to encourage are the replacement industries. For example, replacements for the electric plants, mostly fossil fueled, that are dreadfully anti-environment, aging, and becoming more of a nuisance.

    We also need to reduce the work week from it’s present high of about 44 hours/week to something much lower, such as 35 hours as in some European countries.

  • http://winstonapple.blogspot.com/ Winston Apple

    A few words in defense of my post:

    I believe that anyone who is willing and able to work should be able to provide the basic necessities of life (food, shelter, and needed medical care) for themselves and their families with the wages they receive for working. I know that there are Social Darwinists among us who do not agree with that sentiment. I believe that we would be a better nation for it, if we give meaningful work to those among us who, despite their best efforts, can not find a job on their own.

    Capitalism beats communism hands down when it comes to producing wealth. It is not, however, a perfect system. Two of the most notable shortcomings of pure capitalism are: (1) it is prone to cycles of boom and bust and (2) the system operates quite efficiently for those who are gainfully employed while leaving any number of people unemployed and dependent upon charity for their very existence. In such instances, the government should step in, to the extent necessary, to keep us out of serious, long-term recessions, and to provide socially useful jobs for those who are left out by the market.

    Regarding the expense of providing jobs: The government is already “spreading the wealth” by providing food stamps, Section 8 housing, unemployment benefits, and Medicaid for people who are not able to support themselves within the present system. (Not to mention $700 billion for Wall Street and the banking system.) While it might cost a bit more to put people to work, as opposed to maintaining the present welfare system, I believe it would be worth some additional expense to provide those in need of help with the dignity of a job and to get some return on the expenditure for the taxpayers.

    As far as businesses “competing against … government funded jobs” (Mooja #1), I would differentiate between jobs that need to be done and that require skilled or semi-skilled workers and those jobs that are less vital and which are undertaken primarily to create jobs. Redesigning and rebuilding our infrastructure and moving to alternative sources of energy will involve researchers and construction workers who deserve to be paid the prevailing wages for those types of work. At the other end of the scale, full employment would involve finding unskilled tasks for some individuals who are nearly unemployable. Those jobs should pay no more than the minimum needed to provide the basic necessities mentioned above. People who want to earn more than the minimum would need to look to the private sector for a better paying job.

    I am not in favor of “make-work” projects. Take a look around – there is plenty of work to be done. If we run short of meaningful jobs to be done, we should reduce the work week by a few hours. (I agree with Bliffle (#9) that it would be a good idea to do that anyway.)

    Mooja’s concern is not without merit, however. If we achieve full employment, or even approach it, the ability of employers to hold wages down to the point where some people need to work two or three jobs just to support their families would be minimized, if not eliminated. Lord help us, it might even help unions make a bit of a comeback.

    I would also like to add that I am a strong believer in self-employment. I am currently self-employed and have been for more than half of my adult life. I believe that people work harder and enjoy working more when they are working for themselves. I know I do.

    As noted in my post, the Full Employment Act specifically included the promotion of “self-employment.” Getting the SBA to do its assigned task more efficiently and treating it like something other than a “poor relative” should be a vital part of the push toward full employment.
    And the types of projects cited by Bliffle (#9) and Cannonshop (#2 and #4) would be a good place to start.

  • Lisa Solod Warren

    Winston, please see my recent article at Huffington Post. I think you’ll find it right up your alley.

  • Cannonshop

    #5 Troll, I’m not proposing raising taxes on imports or erecting barriers, I’m proposing lowering existing barriers domestically.

    I see absolutely NO reason to equalize American incomes with Bangladesh or the PRC, mud huts are cold and open-ditch sewers spread disease.

    What I propose is merely that we apply to our side the same standards our ‘trade partners’ apply to THEIRS.

  • http://www.republicofdave.com Dave Nalle

    I am not in favor of “make-work” projects. Take a look around – there is plenty of work to be done.

    And when you take your welfare recipient and give him that job you take that job away from someone who was trying to do it on his own initiaitive, so he might as well sign on with welfare and do it on the government’s dime.

    If we run short of meaningful jobs to be done, we should reduce the work week by a few hours.

    Bingo. We’re France. Taking on the failed experiment in reduced hours which they finally got away from last year after realizing how disastrous it was for their workforce and their economy.

    Dave

  • http://winstonapple.blogspot.com/ Winston Apple

    Dave (#14) – According to your argument, the unemployment rate could never be reduced by governmental action. In saying “there is plenty of work to be done,” I mean work that it not being done by anyone else already. I’ll go so far as to amend my original statement and say that there is plenty of work to be done that falls within the public sector and is not being done by anyone “on his own initiative.”

    In Kansas City, Missouri next Tuesday voters will be voting on a proposed sales tax increase to fund light rail. If it passes, the government will be creating jobs that no one is doing “on his own initiative.” It is also been determined that Kansas City needs a massive upgrading and repair of its sewer system. Again, no one seems to be taking care of that “on his own initiative.” My wife and I recently vacationed in New York City. Lots of trash everywhere. No one picking it up “on his own initiative.”

    As far as your second paragraph. I mentioned reducing the work week only in terms of “spreading the work,” (Oh my God, am I a socialist?) if there is not enough meaningful work to do as we approach full employment. I will admit, however, that I think reducing the work week is a good idea. The GDP might suffer, but our lives might be richer.

    I am in the midst of a very successful experiment related to this topic. I retired from teaching two years ago and returned to self-employment. Since some of my self-generated work was already being done evenings and week-ends while I was teaching, my work week is now considerably shorter than it was. My income (my personal GDP) has also shrunk, which I suppose would give you the opportunity to declare my experiment a failure. I, on the other hand, consider it a booming success. I have more time to read, write, travel, play with the grand-kids, etc. Life is sweet.

    And speaking of France, my wife and I plan to travel there for the first time next year.

  • http://winstonapple.blogspot.com/ Winston Apple

    Lisa (#11) – I just read your piece. Nicely done. I would go so far as to call it a companion piece to my post. I think anyone following this thread should accept your invitation to “click here” and read it.