Five years ago we suffered the worst shock to the economy since 1929, and unemployment exploded. The Recovery Act definitely helped, but didn’t come anywhere close to fixing the problem, and the damage to society has been catastrophic. For example, take a look at the job seekers-to-job openings ratio: it was just over two months ago that the number finally fell below 3-to-1, which is as high as it ever got during the early 2000s recession.
This fact sheet from Demos gives the lowdown on Warren’s bill (which has been previously introduced in the House). Here’s a particularly sharp part of the analysis:
Credit reports were developed to help lenders assess the risks associated with making a loan. Over the last few years, they have been aggressively marketed to employers as a means to gauge an applicant’s character or likelihood to commit theft or fraud. Yet there is no proven link between personal credit reports and criminal behavior or performance of a specific job. A spokesperson for TransUnion, one of the major credit reporting companies, admitted in 2010: “We don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”
It should be said that this is a pretty awkward way to try and direct some benefits down the income ladder. Sure, it’ll help on the margins, and it seems well worth doing. Just not nearly so worth doing as, say, $1 trillion in infrastructure spending. In fact, in a properly functioning labor market, these sorts of abuses would be much less frequent — in a full employment economy, employers that wasted a lot of time and energy doing frivolous credit checks and whatnot that don’t help the business in any tangible way would be at a systematic disadvantage.
Instead, with a chronically slack labor market, we get all kinds of pointlessly cruel inquisitions as employers lord their power over a captive and weakened working class.
Obviously, a whopping great infrastructure package is off the table. And that’s not Elizabeth Warren’s fault, of course. But that’s the point, isn’t it: Elizabeth Warren, the de facto leader of the new economic justice movement, is so stifled by our broken system (the vetocracy, to use Francis Fukuyama’s apt phrase) that this counts as a reform worth of a major media outreach.
And this reform won’t even touch the problem of long-term unemployment, against whom there is massive discrimination already. As Matt Yglesias says, those people are doomed:
We could keep paying UI checks. But we’re not going to do that. And we’re not going to do relocation assistance. And we’re not going to do direct hiring and public works. We’re going to do nothing. We’re going to tell people to go out and look for work, even though employers looking to hire can still afford to be very choosy and generally refuse to even consider the long-term unemployed as job applicants. The country failed these people first by letting the labor market stay so slack for so long that they became unhirable, and now we’re going to fail them again.
When the history books of the Great Recession are written, there will be chapters and chapters about how a sclerotic and dysfunctional system of governance allowed a short-term aggregate demand shock to rot into a serious structural problem. The question now is whether Congress will let the wounded country keep staggering forward, or keep making things worse until the system completely breaks down.