It was encouraging to see President Obama pivot from deficit reduction to job creation in his widely anticipated speech last week. The president proposed a combination of spending and tax reduction policies, and he surprised many people with the boldness of his proposals and his passion and commitment to the issue. Unfortunately, Obama’s plan is unlikely to be much help to struggling labour markets. Fourteen million people are unemployed, long-term unemployment remains near record highs, the ratio of job seekers to job openings is 4.3 to 1, and the employment to population ratio has dropped precipitously. While concerns over the deficit are valid for the long run, they shouldn’t prevent us from doing more to help the jobless. (The debt dilemma is predominantly a health-care-cost issue, and whether or not we help the jobless doesn’t much change its magnitude.)The real problem is the political atmosphere. Republicans may go along with doing just enough to look cooperative rather than obstructionist — but no more than that. And the job-creation policies that emerge from Congress are unlikely to make a dent in chronic unemployment. In fact what emerges won’t be anywhere near the $445 billion program the president has called for, which itself is short of the dramatic intervention needed to really make a difference.
I don’t expect we’ll get much more help from the Fed either. There is quite a bit of disagreement among monetary policymakers over whether further easing would do more harm than good, and inflation hawks are standing in the way of those who want to aggressively attack unemployment. As with Congress, the Fed is likely to adopt a compromise position and do the minimum it can while still looking as though it is trying to meet its obligation to promote full employment.
Thus, despite the President’s newfound interest in job creation, and the call from some at the Fed to treat unemployment the same way they would treat elevated inflation – as though “their hair was on fire” – the actual policies that come out of Congress and the Fed are unlikely to be sufficient.
It’s time for this to change. The loss of 8.75 million payroll jobs since the recession began should be a national emergency. But it’s not, and the question is why. Why has deficit reduction taken precedence over job creation? Why is our political system broken to the extent that a whole segment of the population is not being adequately represented in Congress?
Many of the policies enacted during and after the Great Depression not only addressed economic problems but also directly or indirectly reduced the ability of special interests to capture the political process. Some of the change was due to the effects of the Depression itself, but polices that imposed regulations on the financial sector, broke up monopolies, reduced inequality through highly progressive taxes, and accorded new powers to unions were important factors in shifting the balance of power toward the typical household.
But since the 1970s many of these changes have been reversed. Inequality has reverted to levels unseen since the Gilded Age, financial regulation has waned, monopoly power has increased, union power has been lost, and much of the disgust with the political process revolves around the feeling that politicians are out of touch with the interests of the working class.
We need a serious discussion of this issue, followed by changes that shift political power toward the working class. But who will start the conversation? Congress has no interest in doing so; things are quite lucrative as they are. Unions used to have a voice, but they have been all but eliminated as a political force. The press could serve as the gatekeeper, but too many news outlets are controlled by the very interests that the press needs to confront. Presidential leadership could make a difference, but this president does not seem inclined to take a strong stand on behalf of the working class despite the surprising boldness of his job-creation speech.
Another option is that the working class will say enough is enough and demand change. There was a time when I would have scoffed at the idea of a mass revolt against entrenched political interests and the incivility that comes with it. We aren’t there yet – there’s still time for change – but the signs of unrest are growing, and if we continue along a two-tiered path that ignores the needs of such a large proportion of society, it can no longer be ruled out.
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