Shocking New Jobless Figures, But No Impact On Deficit Talks

As you’ve probably read by now, the latest figures from the Bureau of Labor Statistics show that job growth has all but stalled.

Economists express shock and dismay. But the President and his Republican counterparts in the deficit reduction/debt ceiling talks take it all in stride.

Brief review of what might — but apparently isn’t — shifting their vision from a potential faraway deficit crisis to the crisis we’ve got right now.

Private-sector employers added only 57,000 new jobs last month. The public sector shed another 39,000, leaving total new jobs at only 18,000.

This is a small fraction of what’s needed just to keep up with population growth, let alone make up for the 8.8 million jobs lost since the recession began.

Bad news wasn’t only for June job growth. The BLS report also revised the already-anemic new job figures for May downward by nearly half.

So what many economists thought might be a blip in this year’s growth trend actually heralded what could be something approaching stagnation.

More evidence for this. Average work hours per week dropped a bit, as did average hourly earnings. Employment by temporary help services firms edged downward. These are all, we’re told, indicators that employers, as a whole, aren’t about to start hiring.

The number of unemployed people who were actively looking for work increased to 14.1 million. An additional 982,000 had looked within the last year but given up because they decided that searching was futile.

Nearly 6.3 million of the actively looking had been unemployed for at least 27 weeks — many undoubtedly much longer. This is slightly higher than the figure for May and 450,000 higher than for April.

Some of these long-term jobless people are still getting unemployment benefits, thanks to two related federal programs. One will expire at the end of the year. The other will become irrelevant unless Congress changes the rules.

Workers can qualify only when they’ve exhausted their regular state unemployment benefits. So anyone who loses a job now will get, at most, 26 weeks. As I wrote earlier, some states have cut their programs back to less than that.

So we’ve got an economy that’s growing slowly. Employers who aren’t hiring mainly because they can meet demand with the workers they’ve got.

More than 22.5 million people who are officially unemployed or under-employed, plus about 3.9 million who haven’t looked recently enough to get counted.

About a third of the 22.5 million are getting unemployment benefits, which typically replace only about a third of lost wage income. Well over 2 million can’t get them any more. A large unreported number never could.

We could have scripted the Republicans’ response to all this. House Majority Leader John Boehner says they’re “focused on jobs, and are ready to stop Washington from spending money it doesn’t have.”

Blames stimulus spending, excessive regulations and “an overwhelming national debt” for holding back private-sector job creation.

What about the President?

Well, he’s jawboning Congress to extend the 2% employee payroll tax cut that was part of the December Bush tax cuts deal.

But not to extend the federal add-on to states’ unemployment benefits programs, even though it would deliver a big bang-for-the-buck boost to the economy.

He’s also urging approval of some foreign trade agreements, a streamlined patent process and some unspecified investments to rebuild our infrastructure.

But not any investments to halt the huge job cuts in state and local government programs. Well over half a million since August 2008. And no sign of a letup.

Mostly, however, the President is focusing on a deficit reduction plan that will “get the government living within its means.”

Everything we read tells us it will be mostly — if not exclusively — about spending cuts. It would be more about spending cuts than revenue raisers even if the President got the balance he wants. Not likely.

Bottom line is that we’ve got new evidence of a jobs crisis that’s bigger and more persistent than anyone predicted. Yet the President and the Republican leadership are still focused on a deal that will pull billions more out of the economy.

“Like planning a picnic after Pearl Harbor,” tweets Dean Baker from the Center for Economic and Policy Research.

Budget Debate Is About Values, Not Numbers

New York Times columnist Richard Stevenson provides a good overview of the budget debate underway on Capitol Hill. It’s a “fundamental reassessment of the role and size of government,” he says.

But, as his article suggests, what we’re witnessing is actually a conflict of value systems — core beliefs that extend beyond theories of government.

Republicans are arguing that drastic spending cuts are the only way to avert fiscal disaster — and to create jobs. Most oppose any changes in the tax code that would increase revenues — at least until the unemployment rate has dropped to pre-recession levels. They’re “job killing,” you know.

But neither shrinking the deficit nor boosting job creation drives the Republicans’ agenda. The fact that both reflect the priorities of a wide spectrum of voters gives them an occasion to advance major policy changes consistent with their values.

By and large, Republicans want to whittle the federal government down because their value system puts individual — and corporate — liberty first.

You’re free to choose what you do. And you’re free to keep what you get, less what’s needed for a “robust defense” and presumably other functions that enable businesses to freely grow and prosper.

Thus, the budget resolution the Republican House majority just passed defines government’s “limited but noble mission [as] securing every American’s right to pursue a destiny of his or her own choosing.” And it calls for tax reforms that will let “individuals keep more of what they earn.”

The Democrats have argued that spending cuts right now would cause job losses, but they’ve decided they can’t hold the line. Some would say that the Democrat-in-chief didn’t try hard enough.

But we can’t discount the hard-won recognition that Republicans in Congress can — and will — extort spending cuts as the price for averting national crises. A government shutdown yesterday. Default on the federal debt this summer.

Democrats are nevertheless still coming at our fiscal situation from a different value system. Basically, they’re promoting an agenda that tilts toward our obligations to one another and the good of the whole — obligations that we fulfill through our public institutions.

In other words, they’re placing a high value on the nation as a community. To some extent, this means that individual liberty, as the Republicans conceive it, gives way to “the general Welfare” that’s also envisioned as a goal of the government created by our Constitution.

Beyond this, the agenda reflects the view that we need to act collectively, through our government, to expand opportunity — a necessary, though not sufficient condition for a more equal sharing of the profits generated by economic growth.

Thus, for example, the President wants more funding next year for both Head Start and Title I of the Elementary and Secondary Education Act, the main source of federal funding to improve the education of disadvantaged kids. House Republicans voted to cut current funding levels for both.

I’ve got serious reservations about other parts of the President’s proposed budget — and even more serious reservations about his seeming readiness to embrace even deeper spending cuts.

But I all but stood up and applauded at the end of his speech on his approach to deficit reduction. Because it so clearly articulated the clash in basic values that underlies the current budget debate — one the House budget resolution obfuscates in its claim to “strengthen the social safety net.”

“From our first days as a nation,” the President said, “we have put our faith in free markets and free enterprise…. But there has always been another thread running throughout our history — a belief that we are all connected.”

And “part of this belief expresses itself in the conviction that each one of us deserves some basic measure of security.” So we collectively contribute to programs like Medicare, Social Security and others we commonly refer to as the safety net.

The vision in the House Republicans’ budget plan, he said, “is less about reducing the deficit than about changing the social compact in America.” I think that’s right on target.

And, as Stevenson observes, Republican leaders and their supporters objected to “the implication of heartlessness, but not necessarily to his assessment of their ambition.”

Nearly One In Five Americans Still Struggle With Hunger

The latest food hardship report from the Food Research and Action Center is one more indication that the recession is by no means over for a vast number of Americans.

In 2010, the nationwide food hardship rate was barely lower than in 2009 — 18%, as compared to 18.3%. In the other words, nearly one out of five people in this country sometimes didn’t have enough to eat.

Things were worse at the end of 2008. But, for reasons as yet unexplained, the food hardship rate for the last quarter of 2010 was the highest since Congress passed the temporary increase in food stamp benefits in the first quarter of 2009.

As I’ve said before, “food hardship” is roughly equivalent to what the U.S. Department of Agriculture terms “food insecurity”.

A family is counted as having experienced food hardship if the member surveyed answers in the affirmative when asked, “Have there been times during the last 12 months when you did not have enough money to buy the food that you and your family needed?”

The new FRAC report is considerably more expansive than the update issued in January. It’s the organization’s second full analysis of data Gallup collects to use for a broader well-being index.

Unlike the survey the Census Bureau conducts for USDA, the Gallup sample is large enough to allow reasonably reliable breakouts by small geographic areas and also year-over-year comparisons at the state level.

This makes the report uniquely valuable in two ways.

First, it’s a fine advocacy tool because it provides food hardship rates for every Congressional district in the country. Want to tell your Representative to support the President’s proposed fix for the recent cutback in the food stamp boost? Cite the food hardship rate in your district.

Second, it lets us drill down below the nationwide figure in a variety of ways. We get figures not only for Congressional districts, but for each major region, each state and the District of Columbia and each of the 100 largest metropolitan statistical areas, i.e., city-centered geographic areas defined for use by the Census Bureau and other federal statistical agencies.

So we learn, for example, that:

• Food hardship rates are highest in the Southeast and Southwest. Indeed, 12 of the 20 states with the highest 2010 rates are in these regions.
• Rates are at least 20% in 21 states, with Mississippi topping them all at nearly 29%.
• Rates are 15% or higher in all but five states.
• In no state is the rate below 10%.
• Here in our nation’s capital, the rate is 18.9%, putting the District again in the middle of the state ranking.

In short, as the FRAC report says, “food hardship is a problem in every corner of America, and should be of concern to every member of Congress.”

Ah yes, but is it?

FRAC attributes the persistently high food hardship rates to the ongoing jobs crisis. As it notes, the 2010 U-6 rates — the Bureau of Labor Statistics’ broadest measure of unemployment and underemployment — were generally comparable to those in 2009 and rose a bit toward the end of the year.

And even the U-6 measure understates the total number of jobless people who’d like to — and need to — work because it doesn’t include people who gave up looking more than a year ago.

But both the White House and Congress seem to have put the jobs crisis behind them. The hot debate is how much and where to cut spending. And, Republican assertions notwithstanding, spending cuts mean job losses.

The current spending-cut focus spells trouble for people who urgently need food assistance in other, more direct ways.

The continuing resolution the House passed in late February would cut funding for WIC (the Special Supplemental Nutrition Program for Women, Infants and Children) by about 10%. It would also cut funding for several other programs that help feed low-income people.

These cuts would theoretically be only temporary, since a new federal budget year begins on October 1. But they suggest that President Obama’s Fiscal Year 2012 proposals to address hunger and poor nutrition could face the chopping block.

Let’s hope all those members of Congress with high food hardship rates decide that three squares a day for the nearly 48 million poor people in this country are a better investment than, say, those still-unready, way-over-budget F-25 fighter planes.

UPDATE: Hope may spring eternal, but the Welfare Reform Act recently introduced by some House Republicans would, among other things, eliminate what remains of the funding to keep food stamp benefits at the higher level they’ve been since 2009, when the economic recovery act was passed.

Since this posting was first published, I’ve written another explaining why the bill threatens all safety net programs.

Giving The President His Due On Tax Reform

I realize that I haven’t given President Obama full credit for the tax reforms he’s proposing as part of his Fiscal Year 2012 budget.

First, there seems to be a fairly wide consensus that the basic corporate tax rate is too high. At 35%, it’s higher than the rates in every other country with a highly-developed economy.

Which isn’t to say that U.S. corporations pay more in taxes. In 2009, General Electric owed nothing to the U.S. government. In fact, it managed to report a $1.1 billion tax benefit, i.e., negative domestic earnings, which it can use to offset future tax liabilities.

If I understand correctly, the argument economists make is that the high nominal tax rate, combined with the mass of deductions, credits and the like distorts economic decision-making and may create incentives to locate job-creating production overseas.

So the President’s plan seems to make sense. And the revenues potentially lost by reducing the statutory rate have to — or rather, should be — paid for somehow.

I think I may have been misled by the term “revenue neutral.” I understand now that it’s a shorthand for a corporate tax reform plan that doesn’t increase the deficit. To my knowledge, the President and his people haven’t indicated whether they will seek a plan that raises more revenues from the corporate sector.

Second, the President isn’t focused only on corporate tax reform. He again proposes some changes for individual taxpayers that would bring in more revenues.

As I’ve already said, he’s again going to “push against” a further extension of the Bush-era tax brackets for families earning more than $250,000 a year and again going to try to restore the estate tax to what it was during the last year before it expired.

He’s also recycling some related proposals, e.g., raising the tax rate on capital gains from 15% to 20% — again, only for high-income filers.

And once again, he proposes closing the loophole that allows hedge fund and private equity fund managers to pay the capital gains rate, rather than a regular income tax rate on a substantial portion of their compensation.

Beyond this, the most significant — and undoubtedly controversial — change in the individual income tax code would cap the value of itemized deductions for high-income filers at 28%. Probably the largest impact would be on the subsidy we provide, through the tax code, for home ownership.

The Tax Policy Center puts the total cost of this year’s subsidy for home mortgage interest alone at $131 billion. Savings would be considerably less, since the deduction would be capped only for families with incomes over $250,000.

The Economic Policy Institute reports that all revenues raised by the cap would total $321.3 billion over 10 years.

The President proposed the same deductions cap in 2009 and again in 2010. The first time, the extra revenues were supposed to help pay for the then-pending health care reform plan.

This time, revenues gained would be used to offset the costs of a three-year “patch” for the Alternative Minimum Tax. Congress regularly passes a short-term “patch” to exempt middle income filers, who were never supposed to be subject to the AMT.

But it doesn’t always provide for an offset. So a three-year, paid-for fix seems a fiscally responsible proposal.

None of this, however, affects the point I made about the balance between spending cuts and revenue raisers in the proposed budget.

The roughly one-third revenue raisers/two-thirds spending cuts formula seems to me arbitrary and counter to our national interests.

Top of my list are growing the economy (without destroying the planet), reducing egregious income inequality, ensuring public health and safety and providing for the needs of low-income and other vulnerable people.

Fiscal commission members Alice Rivlin and Pete Dominici chaired another group that developed a plan distinctively different from the plan of the fiscal commission co-chairs.

This one would produce a 50-50 split. Some parts of it are problematic — most notably, the proposals for reducing federal health care spending.

But it shows there’s no magic in the framework the President has apparently adopted. There are a lot of ways to skin this cat.