House Spending Cuts Would Mean Massive Job Losses

March 2, 2011

I suppose this is self-evident, but I think it’s worth saying. Spending cuts as deep and wide as the House Republicans want would throw many thousands of people out of work.

Based on the total non-security cuts that went to the House floor, the Economic Policy Institute estimated somewhat over 800,000. Mark Zandi, Chief Economist at Moody’s Analytics, projects job losses at 700,000 by the end of 2012 — this apparently based on the bill the House passed.

Add to the jobless an uncounted number of workers who would be subject to reduced work hours or furloughs.

In the latter camp would be employees in the Social Security Administration. So much for getting timely action on benefits claims — let alone hearings on the large percentage of disability claims the agency initially rejects.

But it’s not only federal employees that would be affected. Think of all the state and local public service workers who’d find themselves on the unemployment rolls — Head Start and K-12 teachers, staff in one-stop centers for job seekers, etc.

A fact sheet from the Senate Democratic Policy and Communications Center says that the Head Start and Title I (Education for the Disadvantaged) cuts alone could cause an estimated 65,000 layoffs. Not a disinterested source, but not necessarily out of the ballpark either.

And then there are all the private-sector workers indirectly paid by federal grants to the states, e.g., the professionals and other staff in the community health centers that would close or shrink. The centers’ national association estimates job losses totaling 7,434.

Add to these the jobs that would be lost in the maternal and child health centers the Republicans would totally defund. And the 80,000 public service jobs funded by AmeriCorps — also targeted for extinction.

And what about the construction workers who won’t be rehabbing public housing or building new affordable housing because of cuts in the Department of Housing and Urban Development’s budget?

And the workers that we devoutly hope will be maintaining the Washington metro area’s rapid transit system, but probably won’t be if the proposed $150 million WMATA cut is approved?

I could go on generating examples, but I think you’ve got the picture.

Confronted with the loss the federal jobs, House Majority Leader John Boehner replied, “So be it. We’re broke.” Which is stuff and nonsense. But then so is the notion that the proposed spending cuts will reduce the deficit that’s got our policymakers — Republicans and Democrats alike — so agitated.

When people don’t work, they don’t owe as much — or anything — in income taxes. They also don’t buy as much. Business profits go down and, with them, corporate tax payments.

So federal revenues decline, as they did when the recession set in. Meanwhile, mandatory safety net spending, e.g., for food stamps and Medicaid goes up, because more jobless people means more people poor enough to qualify.

So how is the deficit shrinking?

I think just about everyone agrees that federal spending is on an unsustainable upward curve. But the programs the House Republicans would slash have virtually nothing to do with that. The pie chart and analysis on Dustin’s Our Dime blog show why.

Maybe the House Republican leadership has put itself in a box. It pledged to immediately cut at least $1 billion in federal spending while holding the military and programs for veterans and seniors harmless.

This helped get a bunch of Tea Partiers elected. And now they’re insisting that the House make good on the pledge, though the very conservative chairmen of the Budget and Appropriations Committees apparently didn’t want to go there — at least not during the shrinking remainder of this fiscal year.

Whatever the case, I think EPI is right when it warns that the House proposal would magnify the ongoing labor market crisis.

Also right when it says the proposal “suggests that Americans take on unnecessary pain with no long-term gain.” I’d just add that some Americans are going to have lots more pain foisted off on them than others.


Small Victory For Jobless Workers

July 26, 2010

As you all know by now, Carte Goodwin, temporary replacement for the late Senator Byrd, arrived last Tuesday past the nick of time to break the Republican’s filibuster of the latest extension of unemployment insurance benefits. The House swiftly passed the bill. The President signed it. And the Senate moved on to other stalemates.

The UI extension bill provides immediate relief for about 2.5 million jobless workers whose extended benefits were cut off when the authorizing legislation expired. Extended benefits will also be available to other workers who exhaust their regular state benefits before the end of November.

They’ll get somewhere between 34 and 73 weeks of additional benefits, depending on how high their state’s unemployment rate is. Here in the District, with a current unemployment rate of 10%, eligible jobless workers will be able to get a total of 99 weeks of benefits.

I wish I could just rejoice in the hard-won victory. But I can’t help pondering the relatively small impact the bill will have on what promise to be long-term hardships for a vast number of jobless workers and their families.

Several major issues here.

First off, all jobless workers will get $25 a week less than they would have under all but the latest versions of was once a modest, but broader effort to deal with the jobs situation.

This will bring the average weekly benefit down to $284 — less than what’s needed to lift a family of three above the federal poverty line. So jobless workers may have benefits, but we’re still likely to have more families facing utility cutoffs, evictions, etc.

Second, we’re told that only about two-thirds of the 14.6 million people who are officially unemployed are getting unemployment benefits. “Officially” here means that they’ve got no job whatever and are actively looking for one.

At least some portion of the remaining third didn’t earn enough and/or work enough recently enough to qualify. The 1.2 million people who’d looked but given up aren’t getting unemployment benefits either.

Third, the extension will do nothing for workers who’d already exhausted their maximum benefits — the so-called 99ers. Blogger Jackie Headapohl says that economists estimate their number at around 1 million. Also says it’s expected to double or even triple in the months to come.

Received wisdom seems to be that the longer you’ve been out of work, the longer you’ll be out of work. Various reasons floated for this. One, which is bad news even for a lot of recently laid-off people, is that employers have eliminated certain types of positions, e.g., secretaries, travel agents, auto workers.

These jobs have been automated, outsourced or foisted off on other employees. Even a full economic recovery won’t bring them back.

This may be a particular problem for older workers who don’t have the time and resources to retool. Even if they do, they’re likely to face out-and-out age discrimination. Also some biases that amount to the same thing.

Employers may be ready to hire young workers with little or no relevant job experience. But as a commenter on the Poverty in America blog said, “a 57 year old with no experience in a new field isn’t exactly in demand.”

What are these workers to do until they’re old enough to qualify for Social Security benefits that will barely cover their living expenses, if that? By then, many will probably have tapped their shrunken retirement savings.

We can expect the Democrats to mount yet another effort to extend the extra tiers of unemployment benefits some time before the end of November. But, as Washington Post blogger Ezra Klein says, the latest vote in the Senate shows that any further extension will have to be offset — and may not pass even if it is.

Back in May, Senator Charles Schumer (D-NY) pledged to “work with [his] colleagues to create a fifth tier of benefits,” i.e., some unspecified number of weeks beyond the current 99-week maximum. Colleague and influential Finance Committee Chairman Max Baucus (D-MT) has already turned thumbs down on this.

Over on the House side, Speaker Nancy Pelosi (D-CA) has thus for remained technically neutral. At the end of November, she says, “we’ll take up something,” but it will have to satisfy members “from low unemployment areas [who] are very concerned about the deficit.” Odds are Senate Majority Leader Harry Reid (D-NV) will adopt the same calculus and that both will limit their efforts to the existing tiers.

But even repeated extensions of unemployment benefits, with still another tier for at least some long-time jobless people wouldn’t resolve the underlying problem.

The labor market has shed 7.5 million jobs since the recession began. Heidi Shierholz at the Economic Policy Institute says it would need to add about 325,000 jobs every month for the next four years to bring the unemployment rate back down to its pre-recession level. Haven’t seen anyone projecting anything remotely approaching this.

Will Congress rise to the challenges of what promises to be a prolonged jobs crisis, with even longer-term damage to human lives? If past is prologue, the answer is a resounding NO, even if the Democrats do better in November than the prognosticators expect.

What’s worse, it’s hard to know what Congress could do to put such a large number of unemployed people back to work, while at the same time ensuring that new entrants to the job market find work too.

Which is not to say it should wash its hands of the problem. Every job it could save or create would mean at least one less person on the brink of desperation — or over the edge.


Worse State, DC Budget Woes To Come If Extra Medicaid Funding Dies

June 14, 2010

Recent weeks have brought us several important updates on state-level budget woes and their impacts on our still-struggling economy and anemic job market.

First came the Commerce Department’s quarterly report on the gross domestic product–a common measure of the country’s economic health. Cuts in state and local government spending reduced the GDP increase rate by half a percent. This translates into a loss of about $72 billion in economic growth.

Then the National Governors Association and the National Association of State Budget Officers issued the results of their latest fiscal survey of the states. Bottom line here is that Fiscal Year 2010 “presented the most difficult challenge for states’ financial management since the Great Depression.” More of the same is expected in FY 2011.

States spent an estimated $74.4 billion less in FY 2010 than in FY 2008. But they would have had to make even larger cuts if they hadn’t received emergency fiscal assistance through the economic recovery act. The single largest part of this was a higher-than-usual federal match on states’ Medicaid costs (FMAP).

Then we got the Bureau of Labor Statistics’ employment figures for May. While nonfarm payrolls showed on increase of 431,000 employees, but all but 20,000 of them were temporary workers hired by the Census Bureau.

State and local government payrolls shrank by 22,000 jobs. The Center on Budget and Policy Priorities reports that this brings the total to 231,000 jobs shed since August 2008, including 100,000 in education.

The American Association of School Administrators estimates that an additional 275,000 education jobs will be lost in the upcoming school year–unless the federal government steps in with more emergency aid.

And here’s the kicker. According to a lengthier CBPP analysis, 29 states and the District of Columbia developed their FY 2011 budgets on the assumption that FMAP would be extended. Without the assumption, projected shortfalls–and, therefore, cuts–would have been even greater.

It was a reasonable assumption. After all, both the House and Senate had passed bills including a FMAP extension. But, as I recently ranted, the House leadership dropped the extension to garner the votes needed to pass its version of the Senate’s jobs/tax cut extender bill.

Now the Senate leadership has put the extension back into the bill, encouraged by outcries from governors and the National Conference of State Legislators.

It’s trying to corral the magic 60 votes needed for a substantive vote on the bill by easing the tax rates applied to hedge fund managers’ incomes and raising more revenues from oil companies.

Hard to tell whether this will work–or, if it does, whether Blue Dogs will again push back when the bill cycles back to the House.

If the FMAP extension fails, the District will have an estimated $77.6 million budget gap to close. Shortfalls identified in CBPP’s analysis range from $85 million in Maine to a whopping $480 million in Washington state.

No way these and other impending shortfalls will be resolved without larger public service job losses. Mark Zandi, an expert in the economics of economic recovery, says they could be at least as large as those we’ve already seen–”in all likelihood measurably larger.”

Do our business-friendly, deficit-minded members of Congress have a grasp on the impacts? We’ll find out soon, when the Senate votes on whether to proceed to a final vote on the jobs/tax bill.


Will Deficit Reduction Trump Investments In Economic Recovery?

May 19, 2010

It seems that conservatives have scored a big win. They’ve got the federal deficit in the bull’s eye. The debt we’re supposedly leaving to our children has become the unimpeachable reason for curtailing, if not altogether ditching, further investments to cushion the impacts of this prolonged recession and jump-start growth in the labor market.

Consider that Congress still hasn’t extended the expanded unemployment benefits and COBRA subsidies created by the economic recovery act beyond early June.

Nor has it acted on the looming crises resulting from the shortfalls in state and local budgets. The House is scheduled to vote on an extension of the enhanced federal match for state Medicaid programs tomorrow, but the outcome is uncertain because Members are queasy about the cost. ThisĀ  is also the case with key provisions in Congressman George Miller’s Local Jobs for America bill.

The Center on Budget and Policy Priorities reports that at least 45 states and the District of Columbia have cut back spending in core areas like public health, elementary and secondary education and services for elderly and disabled people.

Virtually all these will cause further job losses–not only in the programs themselves, but in businesses that supply the programs with goods and services. Thirty states and the District have also instituted hiring freezes and/or layoffs in their own workforces.

All these and a host of other cuts will feed a vicious cycle. More unemployed people exerting pressures on the safety net, spending less and, of course, paying less in taxes. Perhaps, in fact, eligible for more in refundable tax credits than they pay into the states’ coffers. Retailers buying less from their suppliers, and all of them paying less in taxes too.

But, we’re told, the federal government has to address the rising deficit and related level of federal debt. No doubt about that. If we just keep on keepin’ on, spending will outpace revenues, even after the economy fully recovers.

So we’ll borrow more. The Congressional Budget Office says that the ratio of federal debt to the nation’s gross domestic product (the total value of all goods and services produced) will rise from somewhat below 60% during the coming decade to 79% by 2035. Looking ahead to 2050, CBPP projects a debt level in excess of 300% of GDP.

The consensus view is that sustained high levels of government borrowing drive up inflation and interest rates, making borrowing more expensive for individuals and businesses, as well as the government itself. And revenues that could otherwise be spent on domestic investments must be diverted to paying interest on the debt.

Economic growth slows. And ultimately, some say, investors will lose confidence and shift their funds out of investments based on the U.S. dollar. Today Greece. Tomorrow America.

But that tomorrow is a hypothetical long way off. Right now, we’ve got a jobs crisis and a lot of collateral damage. So it’s very disturbing to see concerns about the long-term, structural deficit override concerns about the here and now.

In February, Lawrence Mishel, president of the left-leaning Economic Policy Institute, and David Walker, CEO of the fiscally-conservative Peterson Foundation, co-authored an answer to the President’s quandary on the deficit. Address jobs now and the deficit later, they said.

CBPP seems to come from the same place. It recommends that Congress allow the 2001/3 tax cuts for high-income filers to expire and, in the short term, use the revenues generated to fund policies that will stimulate economic growth and job creation.

But any proposed tax increases, even those that would affect only the top 2% of the wealthiest households, stir up a maelstrom of opposition–as, in fact, has the President’s entire Fiscal Year 2011 budget, notwithstanding its selective freeze on discretionary domestic spending.

Perhaps the President’s new fiscal commission will come up with a balanced plan to control the long-term deficit. But the need for that shouldn’t be used to block spending needed now to keep the devastating impacts of this recession from getting worse.


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