What About Unemployment? Why Are Obama & Congress Ignoring The Jobless?

ANALYSIS

U.S. President Barack Obama makes a statement on tax cuts and unemployment insurance at the White House in Washington December 6, 2010.
U.S. President Barack Obama makes a statement on tax cuts and unemployment insurance at the White House in Washington December 6, 2010. REUTERS

The plight of the jobless is a slow burn. Weeks turn into months turn into years of idleness, as the process of filling out job applications seems more and more futile the more time passes from one’s last paying gig.

Across America, millions of able, willing people haven't worked for many months, and the unemployment rate has effectively flatlined in the 7 to 8 percent range. Some promising trends have emerged, and the economy is slowly coming back to life, but the unemployed have been largely left behind.

The dismal state of employment

As of April, the unemployment rate stood at 7.5 percent, up from 4.5 percent just six years ago, according to the U.S. Bureau of Labor Statistics.

That means an increase of nearly 5 million unemployed people over that period, to a total of almost 11.7 million jobless Americans as of April, and that doesn't even include the millions of underemployed workers or those who’ve stopped seeking jobs.

Meanwhile, the unemployment rate for African-Americans stands at 13.2 percent; for Americans without high school diplomas it's 11.6 percent.

These figures represent a scourge that has penetrated every level of the job market and every corner of the nation. No longer does ability and willingness to work equate to a reasonable chance to secure a good job.

There has been some positive news recently, as job growth has slowly accelerated in recent months and stocks have soared. But the average of 208,000 new jobs added per month over the past half-year means that the U.S. won’t be back to pre-recession unemployment until 2021, according to the Hamilton Project, an initiative of the Brookings Institution that drafts policy proposals to foster economic growth.

Beyond its impact on individuals, high unemployment is a net negative for the American economy as a whole, as it leaves American families with less buying power, leading to lower profits for businesses, and folks without jobs also do not pay payroll taxes, thereby depriving the government of much-needed revenue.

Federal Reserve Chairman Ben Bernanke spoke on this issue in February.

“High unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole," Bernanke said.

And even employment doesn't guarantee economic comfort. As of 2012, 1.6 million Americans made the federal minimum wage of $7.25 an hour; if they worked full-time, they earned an annual salary of $15,080. For sole breadwinners in a family of four, this salary placed them under the poverty level. And 2.0 million more Americans earned even less than that per hour. In total, these 3.6 million workers made up 4.7 percent of all hourly paid workers last year.

Given all of this, for the average Millennial, the idea of getting married, buying a house, paying off student loans and having kids before the age of 30 -- a goal most of their parents and grandparents were able to achieve, often without even an undergraduate degree -- has become a pipe dream at best.

Initial response

And yet Obama and Congress seem all but blind to the unemployment problem, which is eating away at America's future as older workers become "unemployable" and younger ones are unable to start their careers.

In the aftermath of the 2008 recession, great attention -- and lip service -- was paid to the monumental tasks of boosting economic growth and getting Americans back to work.

The American Recovery and Reinvestment Act of 2009 (aka “stimulus bill” or “ARRA”), which Obama signed on Feb. 17 of that year, was a comprehensive effort to reinvigorate the economy through the injection of $787 billion into a range of projects, initiatives and tax cuts, many of which promised to create jobs and stimulate growth.

And the stimulus did just that. The White House’s Council of Economic Advisers estimated in July 2011 “that as of the first quarter of 2011, the ARRA has raised employment relative to what it otherwise would have been by between 2.4 and 3.6 million [jobs.]”

But in November of that year, the Congressional Budget Office released a report stating that "the employment effects began to wane at the end of 2010 and have continued to do so throughout 2011."

The stimulus was a vital first step toward economic recovery, but politicians have paid little attention  to unemployment since the ARRA was signed four years ago.

Inaction and counterproductive steps

As unemployment remained staggeringly high in America and across much of the globe in September 2010, the International Monetary Fund called on world governments to focus their efforts on reversing that trend and decreasing the ranks of the jobless through “back-to-work policies,” subsidies, job training, direct stimulus and other approaches.

The world financial crisis “won’t be over until unemployment significantly decreases,” then-IMF managing director Dominique Strauss-Kahn said at the time, urging policy-makers to take meaningful steps to get people working again.

But in the years since, America’s leaders in Washington have largely chosen to ignore Strauss-Kahn’s call, and in fact many recent policy changes will likely prove -- or have proven already -- to have the opposite impact, instead contributing to job losses at a time when they are most deleterious.

Deficit hawks have had their way in recent years, successfully implementing a range of tax increases and spending cuts that are driving the deficit down at the fastest pace than at any time since the demobilization from World War II, according to the Office of Management and Budget.

Earlier this month, the New York Times reported that many economists estimate that the unemployment rate would be significantly lower were it not for the laser-like focus on reducing the deficit that has consumed many policy-makers and their efforts to do just that.

“The nation’s unemployment rate would probably be nearly a point lower, roughly 6.5 percent, and economic growth almost two points higher this year if Washington had not cut spending and raised taxes as it has since 2011, according to private-sector and government economists,” the report states.

The result of these spending cutbacks and tax increases, the Times argues, “will soon reduce annual discretionary spending for domestic and military programs to the lowest level in half a century.”

And the cuts keep on coming. The so-called “sequester,” a series of automatic government spending cuts that kicked in because Congress failed to come up with its own targeted deficit cutting plan, is perhaps the most visible and recent of these counterproductive efforts. The sequester slashed government spending at a time when many top economists, led by Nobel Prize winner Paul Krugman, continued to push for policy-makers to avoid austerity measures and instead ramp up stimulus to boost the recovery.

The jury is out on just what effects the sequester will have on employment, but Congressional Budget Office Director Douglas Elmendorf predicted in February that it will lead to the loss of 750,000 jobs.

Though some observers have predicted that the job losses will be far lower than Elmendorf’s figure suggests, the fact is that cutting government spending to the tune of $1 trillion will more than likely lead to hundreds of thousands of newly unemployed professionals.

Why no action?

As unemployment continues to be a concern, many question why tackling this troubling trend is not a greater priority for Obama and lawmakers.

The continued inaction from American leaders in helping their own people emerge from economic distress is even more troubling in the context of developments in Europe, where Germany has recently agreed to undertake a number of initiatives aimed at curbing unemployment in troubled nations like Spain and Portugal.

The answer to the question of why American leaders are failing to address the unemployment crisis even as German leaders announce assistance for other countries in the European Union is complicated, but it stems from two basic political problems.

First is the much-noted congressional stalemate. The story is tired by now, but the scorched-earth tack House Republicans have taken since Obama's reelection and the unwillingness of Senate Democrats to support House Republicans' efforts to stimulate job growth combine to create one of the leading roadblocks to vigorous efforts to stem unemployment.

George Nation, a professor of law and finance at Lehigh University, explained this phenomenon via email Tuesday.

"The reason that there is no serious focus in Washington on job creation is the partisan gridlock that is paralyzing our government. Each side has grown more entrenched and less willing to compromise. The [Affordable Care Act] needs at least technical corrections or will actually result in fewer jobs. Likewise, the sequester also reduces jobs," Nation wrote.

"It may sound cynical, but I believe the focus in Washington is quickly turning to the midterm elections. Perversely, this may mean to some in Washington who would rather win then govern, that the worst things get for the voters the better they believe their chances will be in the midterm elections."

Rather than compromise with Obama during budget negotiations and the lead-up to both the “fiscal cliff” and sequester, allowing for meaningful additional spending and revenue increases to offset their demanded spending cuts, many Republicans have insisted on reducing the deficit and cutting taxes for the wealthy at all costs. Those costs apparently include allowing huge swaths of the middle- and lower-classes to remain in perpetual employment limbo.

But the houses of Congress do not have unilateral control over federal affairs, and one key voice has been missing on this issue for some time. That is, of course, the uniquely powerful voice of Obama, who has refused to make a forceful push for efforts to address unemployment.

Obama, to his credit, has tried to get congressional Republicans to pair their massive spending cuts with job-creating policies like infrastructure programs, and increased spending on research and education. The bailout of the Detroit auto industry saved thousands of good jobs and saved a key manufacturing hub from an unceremonious death. And he recently signed two executive orders aimed at increasing unemployment by creating three manufacturing institutes and making government data available to entrepreneurs.

But Obama has not been nearly forceful, vocal nor visionary enough when it comes to promoting economic growth and reducing unemployment, and he has time and again acquiesced to spending cuts without securing revenue increases or stimulus programs to offset them.

Obama, ever timid and calculating, has repeatedly put far too much faith in the GOP, and he has been burned again and again, constantly frustrated in any efforts he has undertaken to push for more productive economic policies.

But more importantly, he has failed to use his bully pulpit to shame Republicans for their insistence on siding with wealthy Americans over the unemployed.

Obama has repeatedly invoked President Franklin Delano Roosevelt’s name in speeches, promising at September’s Democratic National Convention that he would pursue “the kind of bold, persistent experimentation that Franklin Roosevelt pursued during the only crisis worse than this one.”

But he has failed to live up to FDR’s example. No matter what you think of Roosevelt and his legacy, he was a communicator who engaged the public through his famed “fireside chats” and in so doing built support for his New Deal policies among the citizenry.

It’s a key part of being president, and one that is required in order to be effective. Obama has not engaged in such a sustained push for his economic policies, and thus he cedes ground before the battle even begins.

And unlike many other previous presidents -- like Lyndon B. Johnson, a master of the art of selling his wary legislators on policies including his Great Society -- Obama also seems uninterested in the wooing of legislators, the schmoozing and conversing that is necessary if one is to get anything done in Washington.

Again, it’s a reality of the job he currently holds, a necessary evil, and yet Obama seems to be unwilling to accept it, particularly when it comes to economic debates and issues. And so he flounders, as does the nation’s economic recovery.

The path to restoring low levels of unemployment is there to be taken, but Obama and lawmakers are simply refusing to take the next step.

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