America’s Jobs Deficit More Important than the Budget Deficit

by Robert Reich

The most significant aspect of January’s jobs report is political. The fact that America’s labor market continues to improve is good news for the White House. But as a practical matter the improvement is less significant for the American work force.

President Obama’s only chance for rebutting Republican claims that he’s responsible for a bad economy is to point to a positive trend. Voters respond to economic trends as much as they respond to absolute levels of economic activity. Under ordinary circumstances January’s unemployment rate of 8.3 percent would be terrible. But compared to September’s 9.1 percent, it looks quite good. And the trend line – 9 percent in October, 8.6 percent in November, 8.5 percent in December, and now 8.3 percent – is enough to make Democrats gleeful.

But the U.S. labor market is far from healthy. America’s job deficit is still mammoth. Our working-age population has grown by nearly 10 million since the recession officially began in December 2007 but many of these people never entered the workforce. Millions of others are still too discouraged to look for work.

The most direct way of measuring the jobs deficit is to look at the share of the working-age population in jobs. Before the recession, 63.3 percent of working-age Americans had jobs. That employment-to-population ratio reached a low last summer of 58.2 percent. Now it’s 58.5 percent. That’s better than it was, but not by much. The trend line here isn’t quite as encouraging.

Given how many people have lost their jobs and how much larger the total working-age population is now, we’ve got a long road ahead. At January’s rate of job gains – 243,000 – the nation wouldn’t return to full employment for another seven years.

When they’re not blaming Obama for a bad economy, Republicans are decrying the federal budget deficit and demanding more cuts. But America’s jobs deficit continues to be a much larger problem than the budget deficit.

In fact, we can’t possibly achieve the growth needed to reduce the budget deficit as a proportion of the total economy unless far more people are employed. Workers are consumers, and consumer spending is 70 percent of economic activity. And cutting the budget means fewer workers, directly (as government continues to shed workers) and indirectly (as government contractors have to lay off workers) and therefore fewer consumers.

Yet deficit hawks continue to circle. State and local budgets are still being slashed. The federal government is scheduled to begin major spending cuts less than a year from now. Republicans are calling for more cuts in the short term. Austerity economics continues to gain traction.

Meanwhile Congress is debating whether to renew extended unemployment benefits. This should be a no-brainer. The long-term unemployed, who have been jobless for more than six months, comprise a growing share of the unemployed. (In January they rose from 42.5 percent to 42.9 percent).

Republicans say unemployment benefits are prolonging unemployment, that people won’t get jobs if they get unemployment checks from the government. That’s claptrap, especially when there’s only 1 job opening for every 4 people who need a job. Republicans also say we can’t afford to extend jobless benefits. Also untrue. Jobless workers spend whatever money they get, and their spending keeps other people in jobs.

Government should extend unemployment benefits, and not cut spending until the nation’s rate of unemployment is down to 5 percent. Then, and only then, should we move toward budget austerity.

The job situation is better than it was but it’s still awful. The jobs deficit is still our number one economic problem. Forget the budget deficit until we tame it.

This work is licensed under a Creative Commons License

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, Locked in the Cabinet, and his most recent book, Supercapitalism. His "Marketplace" commentaries can be found on and iTunes.

On Not Asking the 'Job Creators' the Tough Questions

by Tom Gallagher

Do state-level “job creation” programs work? Hard to say, according to a new study. The belief in cutting business taxes as a reliable method for increasing local employment is so widely shared in the U.S. that every state – plus the District of Columbia – offers financial incentives for businesses to “create jobs” within its jurisdiction. So deep is that belief, in fact, that states frequently don’t even consider a cost/benefit analysis necessary. At least that’s the conclusion that a Washington, DC-based public policy center, Good Jobs First, reached in Money for Something, a review of 238 separate job creation programs cumulatively costing state governments over $11 billion in reduced taxes or direct payments.

With state budgets returning to normal about as slowly as the overall economy, more than a few governors and legislators will face yet another season of trying to bring in more and spend less – just to stay even. Granted, the numbers are not as bad as they were: the Center for Budget and Policy Priorities reports twenty-nine states estimating a combined $44 billion shortfall for Fiscal Year 2013, and even if that grows – as CBPP anticipates it will – it won’t match FY 2010's record $191 billion in combined deficits. Unfortunately, though, it’s also the case that budget balancing gets harder each year as more and more of the “easier” options have already been utilized. All of which should make Money for Something essential reading in state capitals.

The study scored state job creation programs on a scale of 100 according to three basic criteria: actual job creation or other quantifiable performance standards; wage standards above the minimum wage; and health insurance or other employee benefits. Individual scores ranged from Nevada’s 82 to Alaska’s 5 and the District of Columbia’s 4, with an overall average score of 40.

For a sense of how states operate these programs, let’s look at the biggest: California. The nation’s most populous state scored a 23, ranking it forty-second. (And a closer look suggests that even this rating is overly generous.) Not surprisingly, it’s home to some of the nation’s highest dollar value job creation programs. Its Research and Development Tax Credit is the largest, with an estimated annual cost of $1,265,000,000 in foregone revenue, and its $670,000,000 Enterprise Zone Program ranks third. Money for Something gave these programs a 10 and 15 score, respectively.

This was not the Research and Development Tax Credit’s first bad review. In 2003, a California Legislative Analyst's report found the program “appears to have been adopted simply as a means of generally encouraging more R&D activity within the state,” rather than having any “specific economic development goals” and further noted that “we are not aware of economic evidence which, on balance, justifies a state credit in addition to the federal credit.” As a result, the Analyst’s Office recommended “that the Legislature consider reducing the credit or phasing it out over time, especially given the substantial direct revenue losses associated with the program and the state's current budgetary position,” while suggesting that “direct research-related spending (such as through the University of California) may well be a more effective means of achieving the same objective.” The program has, however, survived – along with the state’s budget crisis.

The Enterprise Zone Program has been even more controversial. Like so many of the programs studied, there is no requirement that the jobs supposedly created in an Enterprise Zone actually be new jobs – as opposed to jobs transferred from another already existing facility; they need not last longer than a year; and the program carries no wage or benefit requirements. In 2009, the Public Policy Institute of California concluded that the state’s enterprise zones “have no overall effect on job growth.” Atypically, this assessment was actually taken seriously, to the extent that Governor Jerry Brown’s 2011 budget proposed the program’s elimination. Its backers managed to save it in the legislature, however, despite the fact the California Budget Project found “Corporations with assets of $1 billion or more claimed 70.3 percent of the total dollar value of EZ tax credits claimed by corporations in 2008, even though less than half of 1 percent of corporations that file tax returns in California have assets of $1 billion or more.”

Money for Something also found California’s smaller $100,000,000 Film and TV Production Tax Credit pretty much as lax as the other two programs and gave it a 10 as well. And the only reason the state ranked as highly as it did is that the study took the average grade of the four programs it assessed, and the fourth, the Employment Training Panel, which makes workforce training grants, rated a 58. But, at $36,400,000, the Employment Training Panel accounts for less than 2 percent of the combined cost of the programs under review. Were the state’s overall grade prorated according to dollars actually expended in each of the programs, it would get a 12, a mark surpassing only Wyoming, Alaska and the District of Columbia.

How important is all of this? Well, the nation’s biggest state not only has the biggest budget, but the biggest deficit as well – estimates run from $9 to 24 billion depending upon whom you ask – and when. With California having exhausted pretty much every budget trick in the book and officials facing an uphill ballot fight for a $6.8 billion tax measure, the idea that programs like those discussed here could drain $2 billion a year from state coffers based upon premises of job creation that appear to be speculative at best, would seem to be unconscionable.
And there are fifty other stories told in Money for Something, probably the largest study of its kind ever undertaken yet still covers only a small fraction of the estimated $70 billion a year the states expend – directly or indirectly – in the name of economic development. As anyone familiar with state legislatures may know, it’s a lot easier to create a businesses tax incentive program (which will be hailed as improving the “business climate”) than to eliminate one – or even question it, (which be invariably be called bad for the “business climate.”)

Are job creation tax credits a serious strategy? Or just happy talk – and maybe good for the campaign contributors? There has never been a time when we needed clear answers to these questions more than we do now.

Tom Gallagher is a San Francisco antiwar and Democratic Party activist. He is a past member of the Massachusetts House of Representatives.. Reach him at or

Perfect Storm Threatens Long-Term Unemployed

by Greg Kaufmann

In December, there were more than 13 million unemployed workers and about four people looking for work for every available job. According to the Economic Policy Institute (EPI), 5.5 million people have been unemployed for more than half a year, up from 1.2 million in 2007, and the average duration for an unemployed person is over nine months.;

“It is not, of course, that these millions of workers have become lazy, unskilled, or unproductive, it is that there are not enough jobs available,” writes EPI economist Heidi Shierholz. She notes that even new research from the Federal Reserve Bank of San Francisco attributes increased duration in unemployment to “the severe and persistent weakness in aggregate demand for labor.”

So it’s particularly alarming to see Congress playing games with an extension of unemployment benefits that are set to expire at the end of the month. Without an extension, more than one million Americans will be cut off in March, and more than 3.3 million by June 1.

“Instead of offering a hand up and rallying to help those who are most struggling, Republicans and perhaps some Democrats would like to drastically cut down on the maximum number of eligible weeks, and throw up roadblocks to stop many jobless people from getting any benefits at all,” says Debbie Weinstein, executive director of the Coalition on Human Needs.

Some of those roadblocks include stigmatizing drug tests and making people who lack a high school diploma or GED ineligible unless they enroll in classes—though Weinstein notes there are currently about 160,000 people on waiting lists for said classes and Republicans would like to see further cuts to those programs.

For millions of Americans, this isn’t a debate over some abstract benefits extension, it’s a debate over a lifeline.

In 2010, the federal emergency unemployment benefits currently being debated kept 3.2 million Americans from falling into poverty—less than $22,350 annually for a family of four. The unemployment insurance system as a whole kept 4.6 million people above the poverty line. Denying benefits now catches Americans at a particularly vulnerable moment. According to the Corporation for Enterprise Development, 27 percent of American households now live in “asset poverty”—meaning they do not have the savings or other assets to cover the basic expenses a poverty-level income would cover for just three months in the event of a layoff or other crisis. If you take away assets that can’t quickly be converted into cash—like a home, or car—that number jumps to a stunning 43 percent.

“Behind these numbers are very real and often frightening stories,” says Christine Owens, executive director of the National Employment Law Project (NELP). “Millions of midlife and older workers are moving toward retirement with substantially reduced savings because of job loss. The stock market has routed their 401(k)s and their home values are declining. And threats to basic economic security programs continue.”

Those threats aren’t just happening in Congress but at the state level too, creating a perfect storm that threatens the long-term unemployed.

Joan Entmacher, vice president for family economic security at the National Women’s Law Center, notes that South Carolina—which last year reduced the maximum number of weeks for state benefits from twenty-six to twenty—is considering bills that would bar “steady, part-time workers” from receiving unemployment, particularly hurting women who are two-thirds of the part-time workforce in South Carolina as well as nationally. Another bill would make seasonal workers ineligible for benefits during the offseason. Three other bills were approved in subcommittee—drug testing for all applicants, mandatory unpaid community service (burdening workers with caregiving responsibilities and impeding the job search) and complete ineligibility for a worker terminated for even a minor infraction.

“The legislature is blaming the real victims of the recession, the unemployed, for our state budget problems and pursuing senseless cuts and barriers to receiving or keeping benefits,” says Sue Berkowitz, director of the South Carolina Appleseed Legal Justice Center.

Entmacher says the three bills “aren’t moving at the moment” but could be revived if restrictions like the ones being considered at the federal level are passed.

There are, however, opportunities to make your voice heard for a “clean” renewal of benefits through 2012 without cuts or punitive measures. Also today, USAction, NELP and the AFL-CIO begin “Walk in My Shoes” events in front of Congressional district offices across the United State, letting representatives know that people have lost their jobs and homes, now’s not the time to take their unemployment insurance too.

Finally, the GOP would like to pay for any unemployment benefits extension—wait for it… by reducing the number of low-income families eligible for the child tax credit (you can’t make this stuff up). The average impacted family earns $21,000 a year and would lose $1,800 in income. There are indications from people close to negotiations that Democrats might be ready to deal on this. So, when you contact your representatives and ask for that clean extension that will help long-term unemployed people not fall into poverty, make it clear that you don’t want them to do it by throwing kids into poverty.

Homeless, NYC: The New Normal?

New York Times reporter Alan Feuer offers a compelling and poignant profile of a homeless family in New York City and examines city and state homeless policy as well. “Homeless Families, Cloaked in Normality” is an in-depth look at what happens when a couple—a full-time healthcare aide and a maintenance man—lose work and can no longer afford rent. They separate, and the mother and her two boys end up at a shelter, where they try to recover.

Feuer writes that the city’s homeless population is now “higher than it has ever been” at 40,000. That population is comprised of 6,000 homeless men and 2,000 homeless women in facilities for single people, and 15,000 parents and 17,000 children in family shelters. He attributes the rising population to “evictions, many connected to the financial crisis,” the end of a rent-subsidy program and limited Section 8 vouchers.

While there is a “cloak” of normality in the profiled family’s life at the shelter, a new brief from the Institute for Children, Poverty & Homelessness (ICPH) depicts a Bronx and South Bronx where homelessness is all too normal. Indeed, nearly 47 percent of Bronx residents fear becoming homeless, and South Bronx families experience homelessness at a rate three times higher than families in the rest of the city and six times greater than the level nationwide. In 2010, over one-third of all applicants for New York City’s family shelter system were from the Bronx, and 93 percent were either Black (53 percent) or Hispanic (40 percent).

ICPH attributes the homeless epidemic in the Bronx to a 30 percent poverty rate (less than $18,310 annually for a family of three); severe rent burdens with over 55 percent of residents paying more than 30 percent of their income on rent, and nearly one-third paying more than half their income; overcrowding rates that are double the national average; and only 4 percent of rental housing vacant and available.

ICHP spokesperson Diana Scholl says the organization “hopes this brief will continue the dialogue of the need for education, job training, services, and well-paying jobs to reduce poverty in the Bronx and elsewhere.” A draft of ICPH’s “New Path” report proposes “immediate action” to make shelters on-site learning and career-building centers, thereby reducing recidivism.

A Re-entry Model?

Every year, 700,000 formerly incarcerated men and women re-enter society. Within three years, two-thirds are arrested and more than half return to prison. So it’s worth paying attention to a new evaluation of a transitional jobs program run by the Center for Employment Opportunities (CEO) in New York City that shows significantly reduced recidivism and cost savings.

The nonpartisan, nonprofit social and education policy research organization, MDRC, found that program participants were 16 to 22 percent less likely to be convicted of a crime and reincarcerated; and cost savings associated with reduced recidivism were between $1.26 and $3.85 for every $1 in program spending.

“It is very unusual to find recidivism effects like this,” MDRC spokesman John Hutchins told me. “In fact, other research on transitional jobs programs that we’ve conducted has not shown the same results.”

Some of the unique approaches used by CEO include small work crews of five to seven participants, with supervisors who often share a similar background—one-third of CEO staff was formerly incarcerated. These groups seem conducive to developing mentoring-type relationships and peer support. Participants also receive counseling and job search assistance to transition to unsubsidized jobs, and post-placement retention services.

Hutchins says MDRC is currently working on two new projects for the Department of Health and Human Services and the Department of Labor to build upon the success of this program.

Further Reading

“Repairing the Safety Net,” Robert Greenstein
Paying for Cancer Treatment for Children in America,” Wendell Potter
Voices of Poverty
“Dismantling Schools, Disrespecting Communities,” Mark Simon and Leigh Dingerson
Half in Ten Story Bank

Get Involved

Tell Senator Bernie Sanders Your Story: Affordable Dental Care
Gender Equity in the Restaurant Industry
LIHEAP Action Day
Achieving Full Employment for Black Workers
Campaign for Community Change

Vital Statistics

US poverty (less than $22,300 for a family of four): 46.2 million, 15.1 percent.

Kids in poverty: 16.4 million, 22 percent of all kids.

Deep poverty (less than $11,157 for a family of four): 20.5 million people, 6.7 percent of population.

Impact of public policy, 2010: without government assistance, poverty twice as high—nearly 30 percent.

Impact of public policy, 1964-1973: poverty rate fell by 43 Percent.

Number of Americans “deep poor,” “poor,” or “near poor”: 100 million, or one in three.

Quotes of the Week

“Drug testing unemployment insurance applicants is part of a growing pattern of blaming the jobless for their predicament rather than an economic environment where there is one job opening for about every four people looking. [It’s] based on the false assumption that laid-off workers are more likely than others to have substance abuse problems.”
   —Elizabeth Lower-Basch, CLASP senior policy analyst.

“If among you, one of your brothers should become poor, in any of your towns within your land that the Lord your God is giving you, you shall not harden your heart or shut your hand against your poor brother, but you shall open your hand to him and lend him sufficient for his need, whatever it may be.” [Deuteronomy 15:7-8]
   —Interreligious Working Group on Domestic Human Needs, letter to Congress

Copyright © 2012 The Nation

Greg Kaufmann is a Nation contributor. His column, This Week in Poverty, posts every Friday morning. His work has also appeared on Common Dreams, AlterNet,,, CBS, and Constructive comments and ideas will also be read at Please follow him on Twitter as well.

President Obama’s Budget is Disappointing on Jobs, Growth

by Mark Weisbrot

President Obama’s proposed budget has a few interesting proposals for reforms over the next decade. Among the best are the proposals to rescind the Bush tax cuts for households with incomes of more than $250,000, and to tax dividends for stockholders among this group as ordinary income. These and a few other proposals would sum up to a small but significant step in the opposite direction from where this country has been going for the past three decades: i.e. a vast upward redistribution of income to the rich and the super-rich.

But those concerned with the immediate future are likely to be disappointed. Most Americans have to work for a living, but there are more than 25 million, or 15 percent of the labor force that are either unemployed, have given up looking for work, or are involuntarily working part time. The main reason for that is quite simple: there is not enough demand for goods and services in the economy in order to employ them.

With private demand still weak from the collapse of the housing bubble, and state and local governments still tightening their budgets and laying off workers, this leaves the Federal government as the spender of last resort. But President Obama’s budget actually reduces spending, adjusted for inflation, for the coming fiscal year (2013). This means that the Federal government will not contribute to resolving the unemployment crisis under this budget.

This is too bad, because the U.S. economy is down 10 million jobs from where it should be, and even at the recent rate of job growth (200,000 per month over the last quarter), it will take until 2020 to get there.

There are some areas where the budget proposes spending that would create jobs in the coming fiscal year, and the administration has touted these proposals: surface transportation projects ($18.2 billion); teachers ($10 billion); and modernizing schools ($6 billion). But these are small amounts relative to the need for job creation, and the latter two are less than for the prior fiscal year.

Unfortunately, President Obama has accepted way too much of the right-wing narrative, which portrays the United States’ budget deficit and debt as the most important economic problem. In his speech today he said: “I’m proposing some difficult cuts that, frankly, I wouldn’t normally make if they weren’t absolutely necessary. But they are. And the truth is we’re going to have to make some tough choices in order to put this country back on a more sustainable fiscal path.”

But in the short run there is no deficit or debt problem: the United States is currently paying about $1.4 percent of GDP in net interest on our federal debt, which is about as low as it has been over the past 60 years. And the long-term deficit problem is a problem of rising health care costs. If we had the health care costs per person of any other high-income country, we would be looking at long-term budget surpluses. That is how the President should frame the budget issue, and his proposals should focus on creating employment, reducing poverty (which is amazingly now back at the level of the late 1960s), and moving toward a more energy-efficient economy – all of which are complementary goals.

And if there are cuts to be made – to free up spending for job creation -- they are not difficult choices at all: who will suffer if we give up on policing the world with hundreds of military bases throughout the globe? As most Americans have now learned, unnecessary, protracted wars such as in Iraq and Afghanistan do not increase our security but rather reduce it. But the President’s budget avoids any serious reduction of this largest and most harmful source of waste of taxpayers’ dollars.

The President’s budget is just a proposed framework and of course many of the positive things in it will not get through Congress. Since that is the case, it would have been worth his while to propose something bold that addresses the most pressing needs of the nation – and make the necessary compromises from there. By starting with something timid, which is already being attacked as “radical” by House Republicans – well, we have seen where this leads.

This article was published in The Guardian (UK) on February 13, 2012.

Obama’s Plan to Save the Military From Scheduled Budget Cuts

Obama’s Plan to Save the Military From Cuts—at the Expense of Domestic Programs
by George Zornick

As budget wonks comb over President Obama’s outline for fiscal year 2013, a startling White House plan has become clear: the administration is seeking to undo some mandatory cuts to the Pentagon at the expense of critical domestic programs. It does so by basically undoing the defense sequester that kicked in as a result of the Congressional supercommittee on debt. This wasn’t a featured part of the White House budget rollout, and for good reason—it undercuts the administration’s carefully crafted message of benevolent government action and economic fairness.

The process for this shift is complicated, and has been flagged by the Center on Budget and Policy Priorities. Essentially, Obama wants to eliminate individual spending caps for both military and non-military spending, and institute one single discretionary spending cap instead. Here’s the basic rundown.

To understand how deep the retreat really is, one first needs to understand the difference between security spending and defense spending. Spending on defense applies to the “National Defense Function”—that is, the entire Pentagon budget, plus $24 billion for nuclear weaponry and environmental cleanup programs at the Department of Energy, the defense activities of the FBI, and a small handful of other defense programs. Security spending, on the other hand, excludes some of the Department of Energy money, along with some of the other FBI and small program funding—but includes the Department of Veterans Affairs, the Department of Homeland Security and the “International Affairs” part of the budget, which is mainly State Department funding and foreign aid.

So from a progressive point of view, to cut the most fat from the military budget you want defense cuts, not security cuts—otherwise funding for veterans’ health and diplomatic efforts is also in jeopardy.

Next: when the debt ceiling deal passed in August, it implemented discretionary spending caps through 2021. This meant that if Congress appropriated money above certain levels for discretionary spending—which is basically everything the government spends money on, minus entitlement benefits and interest on the debt—something called sequestration kicks in, which entails automatic, across-the-board cuts to bring the budget back under the spending caps.

Under the debt ceiling deal, those spending caps were split between security and nonsecurity spending areas in 2012 and 2013. Nonsecurity spending is the important domestic stuff: everything besides security spending, entitlement benefits and interest on the debt. Think scientific research, the NASA budget, national parks and forests, environmental protection, social services, Head Start and so on. Then, in every year from 2014 through 2021, there would just be one cap. So starting in 2014, Congress could theoretically take everything from nonsecurity spending in order to maintain a healthy security budget and meet the spending cap.

The failure of the supercommittee changed all this. When the twelve members failed to reach an agreement in November, the budget laws automatically changed—now, there is no single cap starting in 2014, but dual caps in both defense and non-defense spending through 2021. That’s why hawks like Senators Jon Kyl and John McCain were so upset when the supercommittee failed—with mandatory caps in defense and nondefense spending through 2014, it was a worst-case scenario for defenders of the Pentagon budget.

The Obama budget plan, quite disappointingly, proposes to reverse the configuration of these caps. It would have caps in 2013, split between security and nonsecurity spending—not defense and nondefense—and then beginning in 2014, a single cap is reinstituted anyhow. All the firewalls ensuring that defense spending is reduced would thus be torn down.

The president’s budget for 2013 follows this new scheme: Obama proposes around $5 billion in spending above the defense cap, and $5 billion in spending below the nondefense cap. This would violate the current budget laws—unless the categorization was changed to security and nonsecurity spending. Then it would comply. And every year after, the distinction wouldn’t matter anyhow under one spending cap.

This is a dramatic shift in priorities, and one that not many people are discussing. Given the massive lobbying potential of the defense industry—and the comparably weak advocates for things like Head Start funding—it’s a virtual certainty that, under the White House proposal, these strict spending caps would be met by raiding nonsecurity spending heavily in years to come. Even the president’s own budget does that. One shudders to imagine the budget of President Romney or President Rubio.

© 2012 The Nation

George grew up in Buffalo, NY and holds a B.A. in English from the State University of New York at Buffalo. Prior to joining The Nation, George was Senior Reporter/Blogger for He worked as a researcher for Michael Moore's SiCKO and as an Associate Producer on "The Media Project" on the Independent Film Channel.

Corps Don’t Need a Tax Cut, So Why Is Obama Proposing One?

by Robert Reich

The Obama administration is proposing to lower corporate taxes from the current 35 percent to 28 percent for most companies and to 25 percent for manufacturers.

The move is supposed to be “revenue neutral” – meaning the Administration is also proposing to close assorted corporate tax loopholes to offset the lost revenues. One such loophole allows corporations to park their earnings overseas where taxes are lower.

Why isn’t the White House just proposing to close the loopholes without reducing overall corporate tax rates? That would generate more tax revenue that could be used for, say, public schools.

It’s not as if corporations are hurting. Quite the contrary. American companies are booking higher profits than ever. They’re sitting on $2 trillion of cash they don’t know what to do with.

And it’s not as if corporate taxes are high. In fact, corporate tax receipts as a share of profits is now at its lowest level in at least 40 years. According to the Congressional Budget Office, corporate federal taxes paid last year dropped to 12.1 percent of profits earned from activities within the United States. That’s a gigantic drop from the 25.6 percent, on average, that corporations paid from 1987 to 2008.

And it’s not that corporations are paying an inordinate share of federal tax revenues. Here again, the reality is just the opposite. Corporate taxes have plummeted as a share of total federal revenues. In 1953, under President Dwight Eisenhower, a Republican, corporate taxes accounted for 32 percent of total federal tax revenues. Now they’re only 10 percent.

But now the federal budget deficit is ballooning, and in less than a year major cuts are scheduled to slice everything from prenatal care to Medicare. So this would seem to be the ideal time to raise corporate taxes – or at the very least close corporate tax loopholes without lowering corporate rates.

The average American is not exactly enamored with American corporations. Polls show most of the public doesn’t trust them. (A recent national poll by the University of Massachusetts at Lowell found 71 percent with an unfavorable impression of big business – about the same as those expressing an unfavorable view of Washington.)

The Administration’s initiative doesn’t even make sense as a bargaining maneuver.

Republicans will just accept the Administration’s lower corporate tax rate without closing any tax loopholes. House Republicans have already made it clear that, to them, closing a tax loophole is tantamount to raising taxes. And corporate lobbyists in Washington know better than anyone how to hold tight to loopholes they’ve already got.

Big business will fight to keep their foreign tax shelters. After all, it’s almost impossible to distinguish between their foreign and domestic earnings, which is why the U.S. Chamber of Commerce and other business lobbies have spent the past three years trying to make it even easier for companies to defer U.S. taxes on income they supposedly earn outside the country.

Representative David Camp, a Michigan Republican who heads the House Ways and Means Committee, has already proposed a 25 percent corporate top rate and changes that would let companies avoid paying U.S. taxes on even more of the income they say they earn outside America.

Nothing is going to be enacted this year, anyway, so it would have made more sense for the Administration to support a hike in corporate taxes – and use it to highlight the difference between the President and his likely Republican challenger.

Mitt Romney wants to reduce the corporate tax rate to 25 percent before eliminating any tax loopholes. Rick Santorum wants to cut the rate to 17.5 percent and eliminate corporate taxes for manufacturers. Newt Gingrich wants to cut the rate to 12.5 percent and let companies write off all capital investments immediately.

It’s discouraging. The President gives a rousing speech, as he did on December 6 in Kansas. Then he misses an opportunity to put his campaign where his mouth is.

© 2012 Robert Reich

Robert Reich is Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written twelve books, including The Work of Nations, Locked in the Cabinet, and his most recent book, Supercapitalism. His "Marketplace" commentaries can be found on and iTunes.

Simple Arithmetic Not Fake Narratives Offer Antidote for US Jobs

by Dean Baker

Last week's May jobs numbers were bad news, regardless of how you look at them. Job growth over the last three months has averaged slightly less 100,000 a month, roughly the pace needed to keep pace with labor force growth. The unemployment rate ticked up to 8.2% and the employment to population ratio is still just 0.4 percentage points above its trough for the downturn. And real wages almost certainly declined in May.

However bad this story is, the usual gang of pundits cited in the media had their usual burst of over-reaction. There were many talking of a worldwide slowdown and a possible recession. This is a serious misreading of the jobs report and other recent economic data.

The main story of the apparent weakness of the last three months is the apparent strength of the prior three months. In other words, the story is still the weather. The relatively strong growth in jobs and other measures that was the result of a relatively mild winter meant that we would see weaker growth than normal in the spring.

If companies hire people because demand picked up in February rather than April, then they will not be doing as much hiring in the spring as would ordinarily be the case. The same story applies to consumer demand. Families that took advantage of unusually mild winter weather to buy a car in January or February don't go out and buy another one in the spring.

The weak job growth of the last few months will not persist. The underlying rate of growth of the economy is still in a 2.5-3.0% range. Investment in equipment and software is likely to continue to rise at close to a double-digit rate. House prices have finally stabilized nationally, and some of the hardest hit cities like Phoenix and Miami are even seeing a mini-boom.

The chaos and recession in the eurozone are a drag on growth in the United States, as is the slower growth that seems to be facing China. But exports to the European Union are less than 2.0% of GDP and exports to China are less than 0.8% of GDP. Even large dropoffs in these categories of demand will have only a limited impact on growth. This is not the story of recession.

The excessive negativism matters for the same reason that it mattered last summer, when the double-dip crowd was ranting about the weak economic numbers in the spring of 2011. Creating an overly negative view of the economy lays the basis for excessive optimism, as we saw last fall, when the recovery was actually following an extremely mediocre course.

These swings from excessive pessimism to excessive optimism, and back again, are preventing the public from understanding the real picture of the economy – which is, in fact, awful. This is like baseball fans standing up and cheering wildly when their pitcher throws a strike, then falling into despair when the next pitch is a ball, ignoring the fact that their team is losing 12-0.

The discussions of the economy have lost sight of the basic score. The US economy is operating at close to 6% below its potential with employment down by almost 10 million compared with its trend level. This is an incredible waste of resources. It is also devastating to the unemployed workers and their families.

The basic story of this downturn remains incredibly simple. We lost close to $1.4tn in annual demand when the housing bubble collapsed. The construction boom that was fueled by the bubble went into reverse, with new construction falling to its lowest levels in more than 50 years. The consumption boom fueled by the bubble-generated equity collapsed when that equity disappeared.

We cannot return to full employment until we have something to replace the demand that had been generated by the housing bubble. This is simple arithmetic.

Unfortunately, both parties in the United States refuse to talk about filling the hole created by the collapse of the housing bubble in a serious way. The Republicans talk about giving everything to "job creators", with the idea that if we are generous enough to the rich (with tax cuts), they will show their gratitude by creating jobs. There is zero evidence to support this view. Are we supposed to believe that investment will somehow increase by 50% as a share of GDP just because we are nice to rich people?

The world doesn't work that way. Firms create jobs when they have more demand, not because we are nice to their rich owners.

President Obama and the Democratic leadership have refused to put forward a serious alternative path. While they have been willing to argue that rich people should have to pay some taxes, they have not come to grips with the nature of this downturn, as if hoping that, somehow, the economy will just jump back to its pre-recession level of output through some magical process. There is no magic that will allow the economy to override basic arithmetic. In the short term, only the government can provide the boost necessary to support the economy. Over the longer term, we will need to get the trade deficit down through a more competitive dollar.

It's a simple story. But as long as people are obsessed with short-term, weather-induced fluctuations, we will not see a serious discussion of the underlying state of the economy.

© 2012 Guardian News and Media Limited

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer and the more recently published Plunder and Blunder: The Rise and Fall of The Bubble Economy. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.

Recovery? What Recovery?

Behind the New Jobs Numbers, Dull Statistics Tell a Terrifying Story
by Ted Rall

“Worst U.S. Jobs Data in a Year Signals Stalling Recovery,” The New York Times ran as its lead headline on June 2. The Labor Department reported that the U.S. economy created 69,000 jobs during May. The three-month job-creation average was 96,000. Unemployment ticked up a tenth of a point, from 8.1 to 8.2 percent.

Once again, the media is downplaying a blockbuster story—recovery? what recovery?—by dulling it down with a pile of dry, impenetrable statistics.

Wonder why you can’t find a job or get a raise, and your house has been sitting on the market for years? The new jobs numbers are the key to understanding how bad the economy is—and why it’s not likely to get better any time soon.

Q: If nearly 100,000 Americans per month are finding jobs, why are securities markets tumbling?

A: Because it’s actually a net jobs loss. The U.S. population is growing, so the work force is too. We need 125,000 new jobs a month just to keep up with population growth. “In the last 22 months, businesses have created more than three million jobs,” President Obama claimed in his January 2012 State of the Union speech. True or not, a more straightforward claim would have been net job creation: 350,000 jobs over 22 months, or 15,000 per month. (Politifact rates Obama’s line as Half True.)

Q: If we’re losing jobs, why is the unemployment rate hovering? Why isn’t it going up faster?

A: Discouraged workers, i.e. people who would take a job, but have given up looking, don’t count as officially unemployed. Neither do those whose unemployment benefits have run out, yet haven’t found new work. Ditto for those who are underemployed—a laid-off middle manager who earned $100,000, now scraping by on a fraction of her former salary by taking odd jobs.

The officially unemployed—men and women who lost their jobs recently enough to still collect unemployment benefits—are remaining more or less steady. Since the number of long-term unemployed is rising, however, the unofficially unemployed is growing fast—but neither the government nor the media acknowledges their existence.

To muddy things up even further, the feds have rejiggered the numbers to make it look like there are fewer officially unemployed than there used to be. The respected blog Shadow Government Statistics, which calculates unemployment using the way the Labor Department did until the 1980s, says this Alternate Unemployment Rate is about 23 percent—about the same as at the peak of the Great Depression.

No wonder why there are so many empty storefronts.

The really interesting number is the Labor Force Participation Rate: how many people want a job, but don’t bother blitzing the Internet with their resume? Melinda Pitts of the Atlanta branch of the Federal Reserve Bank points to “marginally attached” “nonparticipants” in the labor force. “A nonparticipant who is marginally attached indicates they want employment or are available for employment. Also, they indicate having looked for a job in the previous year but not actively looking for a job at present,” she says. This group is failing to return to the “real” labor force at higher rates than in the past.

Q: So what’s up?

A: The jobs figures reflect a big structural problem in the U.S. economy. Real wages have been steadily dropping since the 1970s. We’re creating a permanent class of unemployed and underemployed. And there’s no help on the way from government or private sector, both of which are cutting back and laying off. Even if we got “up” to 125,000 new jobs a month, that would still leave at least 8.1 million people who lost jobs between 2007 and 2010 out of work.

That’s a huge hole. Taking Obama at his Half True word of 15,000 net new jobs a month, it would take 45 years to find gigs for the victims of the 2007-to-2010 subprime mortgage meltdown. Only something big and dramatic, like a new FDR-style Works Progress Administration, could fill it. “Normal” post-recession growth can’t do it. And this recovery—if you can call it that—is anemic at best.

Q: Anything else?

A: Yeah. Jobs don’t equal jobs. If you replace a $70,000-a-year job with a $60,000-a-year job, that’s a net decline in income. Politicians will claim that the old lost jobs have been replaced with new ones, but multiply that trend over millions of workers, and you’ll see reduced consumer spending. Among the still-employed, inflation-adjusted wages are dropping.

Oh, and what about the debts people accrued while they were between jobs? Because many employers refuse to hire jobseekers with bad credit, the unemployed are punished for being unemployed with…more unemployment. As for those who return to work, even workers who get the same pay have to pay off credit card bills they lived on.

The economy is a whale of a problem. But politicians of both parties—and the media—are only paying it the thinnest of lip service.

Copyright 2012 Ted Rall

Ted Rall is the author of the new books "Silk Road to Ruin: Is Central Asia the New Middle East?," and "The Anti-American Manifesto".

Looking for a Good Job? Don’t Get Your Hopes Up

by Michelle Chen

If you think your job stinks, you're not alone. And if you’re still looking for a decent job, don’t expect to find one anytime soon, or ever.

A new analysis of job quality, assessing various measures of benefits and wages, confirms what many of us already suspected: Good jobs are vanishing from the United States, with global trade and social disinvestment leaving workers stranded on a barren economic landscape.

The report (, published by John Schmitt and Janelle Jones from the Center for Economic and Policy Reseach (CEPR), shows that the downward spiral began long before the recent economic crisis. It notes that since 1979, the "good job" (one that "pays at least $18.50 an hour, has employer provided health insurance, and some kind of retirement plan") has become an endangered species:

[T]he economy has lost about one-third (28 to 38 percent) of its capacity to generate good jobs. The data show only minor differences between 2007, before the Great Recession began, and 2010, the low point for the labor market.

In 2010, "less than one-fourth (24.6 percent) of the workforce" ( possessed those precious good jobs. And the clincher is this downturn is beginning to look like a sad plateau:

The deterioration in the economy's ability to generate good jobs reflects long-run changes in the U.S. economy, not short-run factors related to the recession or recent economic policy.

While workers around the world have witnessed massive economic volatility in the recent boom-bust cycles, food crises and political upheavals, the trend line of labor hardship holds steady. The societal impacts of unemployment crises parallel the effect of long-term effects on individual workers, especially young ones--a self-perpetuating sense of despair and isolation, and perhaps entrenched, long-term suffering.

The report’s long-term prognosis undercuts the historically entrenched national mythology of upward mobility. Alan Barber, a spokesperson for CEPR, tells In These Times via email:

It may come as a surprise or at least run against logic to some readers because even though the workforce is better educated and older, one would expect that more people have good job. Conventional wisdom holds that if a person goes to college and gets a degree they will get better jobs. It also holds that the longer you are in the workforce the better your prospects for getting a good job. But as the report shows this is not the case.

The divergence between the American Dream and American reality has widened as neoliberal policies have assaulted workers under the guise of promoting “personal responsibility.” The belief that hard work pays off has been betrayed by the degradation of public trusts like education and health care, while mortgage and student debt crises and the decline of union representation, hollow out communities from within.

The erosion of public services and social programs is nothing new, but the flip side of a shrinking safety net--a crumbling labor market--pushes self-sufficiency even further out of reach for millions.

The vanishing promise of social mobility may have an even more severe impact across generations. According to the Pew Economic Mobility project’s report ( on intergenerational prosperity:

Eighty-four percent of Americans have higher family incomes than their parents did.

Those born at the top and bottom of the income ladder are likely to stay there as adults. More than 40 percent of Americans raised in the bottom quintile of the family income ladder remain stuck there as adults, and 70 percent remain below the middle.

African Americans are more likely to be stuck at the bottom and fall from the middle of the economic ladder across a generation.

So apparently the traditional rungs by which earlier generations climbed the class ladder--a bachelor’s degree, a first home, “loyalty” to a single company--are now shakier than ever. Pew researchers uncovered a cleft in mobility over time: in terms of “relative” mobility, people tend to do a bit better than their parents. But the gains often fail to add up to “absolute” mobility, which means people don't ascend to a significantly better income bracket. Many are actually falling behind relative to the rest of the economy. About 16 percent are “downwardly mobile,” staying put or falling in the class hierarchy. Overall, some 20 percent “make more money than their parents did, but have actually fallen to a lower rung of the income ladder.”

The withering of the middle class is deeply skewed by race, with black and white households moving ahead at vastly different rates. According to Pew, “only 23 percent of blacks raised in the middle exceed their parents’ wealth compared with 56 percent of whites.”

So what’s left for workers who not only face a lifetime of economic hopelessness, but also can’t even give their kids the hope of achieving something more? The CEPR report doesn’t offer policy prescriptions, but does note that the shrinking share of good jobs in the U.S. workforce is not an inevitability. The research connects the decline in quality jobs to the dismantling of the economic supports that make work fair and rewarding, including union power and industry regulations. On a macro level:

the decline in the economy’s ability to create good jobs is related to a deterioration in the bargaining power of workers, especially those at the middle and the bottom of the income scale. The main cause of the loss of bargaining power is the large-scale restructuring of the labor market that began at the end of the 1970s and continues to the present.

The public sector has suffered under privatization, and once-solid middle-class jobs have been lost to the tides of global commerce. Immigrants meanwhile have been absorbed into a precarious low-wage workforce that feeds raging inequality. And meanwhile, political elites are finding new and creative ways to siphon more resources away from the public and subsidize predatory corporate wealth.

The deficit in good jobs can’t be simply chalked up to globalization or a decline in American workers’ “competitiveness.” It’s a reflection of a deficit in power at the bottom, and a surplus of greed at the top.

© 2012 In These Times

Michelle Chen is a contributing editor at In These Times. She is a regular contributor to the labor rights blog Working In These Times,, and Pacifica's WBAI. Her work has also appeared in Common Dreams, Alternet, Ms. Magazine, Newsday, and her old zine, cain.

A Bold New Call for a 'Maximum Wage'

A national labor leader aims to expand the economic fairness debate.
by Sam Pizzigati

How about taking a moment this Labor Day to reflect about those Americans who earn the least for their labor?

These Americans — workers paid the federal minimum wage — are now making $7.25 an hour. On paper, they're making the same wage they made in July 2009, the last time we saw the minimum wage change. In reality, minimum-wage workers are making less today than they made last year because inflation has eaten away at their incomes.

Minimum-wage workers here in 2012 simply can't purchase as much with their paychecks as they could in 2011. And if you go back a few decades, today's raw deal gets even rawer. Back in 1968, minimum-wage workers took home $1.60 an hour. To make that much today, adjusting for inflation, a minimum-wage worker would have to earn $10.55 an hour.

In effect, minimum-wage workers today are taking home almost $7,000 less a year than minimum-wage workers took home in 1968.

Figures like these don't particularly upset many of our nation's most powerful, in either industry or government. We live in tough times, the argument goes. The small businesses that drive our economy simply can't afford to pay their help any more than they already do.

But the vast majority of our nation's minimum-wage workers don't labor for Main Street mom-and-pops. They're employed by businesses that no average American would ever call small. Two-thirds of America's low-wage workers, the National Employment Law Project documented ( in July, work for companies that have at least 100 employees.

The 50 largest of these low-wage employers are doing just fine these days. Over the last five years, these 50 corporations — outfits that range from Walmart to Office Depot — have together returned $175 billion to shareholders in dividends or share buybacks.

And the CEOs at these companies last year averaged $9.4 million in personal compensation. A minimum-wage worker would have to labor 623 years to bring in that much money.

So what can we do to bring some semblance of fairness back into our workplaces? For starters, we obviously need to raise the minimum wage. But some close observers of America's economic landscape believe we need to do more. A great deal more.

Count Larry Hanley among these more ambitious change agents. Hanley, the president of the Amalgamated Transit Union, sits on the AFL-CIO's executive council, the labor movement's top decision-making body. He recently called for a "maximum wage" (, a cap on the compensation that goes to the corporate execs who profit so hugely off low-wage labor.

Hanley wants to see this maximum defined as a multiple of the pay that goes to a company's lowest-paid worker. If we had a "maximum wage" set at 100 times that lowest wage, the CEO of a company that paid some workers as low as $16,000 a year could waltz off with annual pay no higher than $1.6 million.

During World War II, labor leader Hanley points out, President Franklin D. Roosevelt called for what amounted to a maximum wage. FDR urged Congress to place a 100-percent tax on income over $25,000 a year, a sum that would now equal, after inflation, just over $350,000.

Congress didn't go along. But FDR did end up winning a 94-percent top tax rate on income over $200,000, a move that would help usher in the greatest years of middle-class prosperity the United States has ever known.

Throughout World War II, FDR enjoyed broad support from within the labor movement — and the general public — for his pay cap notion. Now's the time, Hanley believes, to put that notion back on the political table. We need, he says, "to start a national discussion about creating a maximum wage law."

Hanley may just have started that discussion.

This work is licensed under a Creative Commons License

Sam Pizzigati edits Too Much, the Institute for Policy Study's online weekly newsletter on excess and inequality.

Bad Jobs on the Rise

Bad Jobs on the Rise

For Immediate Release: September 5, 2012
Contact: Alan Barber, (202) 293-5380 x115

Washington, D.C.- Almost one-fourth of U.S. workers are in a bad job, according to a new report from the Center for Economic and Policy Research (CEPR). Despite substantial increases in the education, age, and quantity and quality of technology over the last three decades, the share of workers with a “bad job” has risen since 1979, the CEPR researchers concluded.

The report, “Bad Jobs on the Rise" (, defines a bad job as one that pays less than $37,000 per year, does not have employer-provided health insurance, and lacks some kind of retirement plan. The $37,000 figure (which translates to about $18.50 per hour, full-time) is equal to the inflation-adjusted earnings of the typical male worker in 1979, the first year of data analyzed in the report. By this definition, in 2010, 24 percent of the workforce had a “bad job,” up from 18 percent in 1979. The new report complements earlier CEPR research ( documenting the decline in “good jobs” over this same period.

Compared to the end of the 1970s, the typical worker today is almost twice as likely to have a four-year college degree, is about seven years older, works with about 50 percent more physical capital, and uses much more advanced technology. Despite this, the share of bad jobs has grown.

“The increase in the share of bad jobs has little to do with the Great Recession,” said John Schmitt, a senior economist at CEPR and one of the report's co-authors “Almost all of the increase we document had already occurred by 2007, before the downturn.”

The main driver of the rise in bad jobs, the report argues, was the systematic decline in workers' bargaining power since the end of the 1970s. The reports' authors point to the fall in the inflation-adjusted value of the minimum wage, the decline in union representation, trade deals, and high unemployment as some of the key factors reducing the bargaining power of workers relative to their employers.

The full report can be found here.


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