A jobs lesson from the New Dealers

By Harold Meyerson
Wednesday, February 3, 2010

The Democrats have shifted their focus, they tell us relentlessly, to jobs, jobs, jobs.

Would that they had.

In fact, the job proposals coming from the Obama administration and the Democratic Congress are far too small to seriously reduce the massive unemployment created when the financial and housing bubbles popped. Many Democratic leaders know that, and some want to do more.

The current proposals, I was told this past weekend by George Miller, chairman of the House Education and Labor Committee and probably Speaker Nancy Pelosi's most trusted counselor, "are not adequate to the scope of the problem. You still have a big gap between the resources we're offering and where we need to be. Clearly, more has to be done."

The $100 billion stimulus President Obama put forth in his budget is almost laughably smaller than last year's $787 billion package, which most economists credit with saving or creating 1.5 million to 2 million jobs. Obama still supports some aid to state and local governments and infrastructure projects, but his main emphasis is on programs that would enable small businesses to increase hiring. These include a tax credit for new hires, eliminating capital gains taxes for their new investments, and redirecting TARP funds to community banks to lend to small enterprises.

Politically, these may be programs that Republicans oppose at some peril -- forcing them to choose between the interests of their small-business backers and their opposition to all things Obama. Economically, however, their effect isn't likely to be great. Small-business rehiring, like bank lending, depends chiefly on American consumers returning to their old spending ways, which is not likely to happen until unemployment tumbles.

Late last year, House Democrats passed a stimulus bill authorizing $154 billion in spending on infrastructure, assistance to states and aid to the unemployed. The Senate, which is reportedly planning to unveil proposals this week, is said to be hung up on the cost of legislation. Early indications are that it will be a good deal smaller than the House's.

The common thread within the Obama and congressional proposals is, alas, resignation. Faced with Republicans who won't support any solution but tax cuts, and with increased though mistimed concern over the size of the deficit, the Democrats propose to shrink unemployment only at the margins.

Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, told Congress last week that he foresaw official unemployment remaining around 10 percent through year's end and perhaps falling beneath 8 percent only by the 2012 presidential election. (Add the underemployed and the figures are far higher.)

In that context, Democratic job proposals fall woefully short. "If you're really going to make a dent in the unemployment numbers, you have to move in the direction of public jobs," says Miller. "We could create a lot of those jobs -- not with a great wage, but a decent wage. We could put people to work in local agencies."

Miller is looking at such proposals, but it would probably take a mass movement of labor, community groups and whatever is left of Obama's scattered legions all demanding jobs and economic equity for such a bill to garner even a chance of passage.

Yet it's not as if the government hasn't done this before. In the winter of 1933-34, with unemployment close to 25 percent, FDR aide Harry Hopkins put an astonishing 3 million people on the federal payroll in just 90 days, repairing airports, military bases and schools. This in a nation of just 130 million people -- the equivalent today would be around 7.5 million. Hopkins and Roosevelt faced the same criticisms -- over the size of the deficit and the growth of the federal government -- that Obama and the Democrats face. But the New Dealers persisted throughout the 1930s, reducing unemployment; building roads, airports and bases; and securing the allegiance of voters for decades to come.

Today's Democrats seem to lack the urgency, compassion and spine of their '30s forebears. Obama's proposals fail to challenge the conservative narrative that government can't engender worthwhile economic activity, so all we can do is cut taxes on business and hope for the best. No narrative is more in need of challenging, but Obama has demurred at the very moment he must make the affirmative case for government. With the private sector economically unable to produce jobs, and the public sector politically blocked from doing so, we are condemned to a long, dismal decade.


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