Comments on the News

As the new administration tries to formulate its economic goals, it seems to be consciously aiming low. At first, President-elect Obama hoped to generate 2.5 million jobs in his first two years. Later, he upped the target to 3 million jobs. That would be better, but it’s still a rather paltry number and would hardly constitute a full recovery for
the economy.

Consider the basic numbers:

--In November, according to government statistics, 10 million Americans were unemployed. That’s more than triple the current target for the next two years.

--The American economy has lost 2.6 million jobs since the peak in June 2007 for total private employment. In November 2008 alone, employment levels fell by 533,000. When December numbers are released, we may be close to or even beyond three million jobs lost in a year and a half.

--According to the US Department of Labor, the natural rate of increase in the work force is approximately 100,000 persons. Thus, every 24 months, 2.4 million jobs would be needed just to stand still.

--So, merely to get back to the June 2007 level will require 2.6 million jobs plus 100,000 for each month thereafter. Eighteen months later, we’re already 4.4 million jobs short – and digging deeper.

--By the mid-point of the first next administration the deficit compared to mid-2007 will be 6.8 million jobs.

When facing the worst economic crisis in 80 years, it may be good politics to lowball expectations. Of course, Obama isn’t the first politician to try to lower expectations. Recall that in far less challenging times Bill Clinton pledged to produce ten million jobs by 2000. It sounded bolder than it was (the natural increase in the workforce would have been expected to eat up almost all the 10 million jobs), and he overshot his target: while the civilian workforce grew by 14.5 million in his two terms, the ranks of the employed soared by 18.4 million. Unemployment fell by 3.9 million workers, pushing the unemployment rate to below 4 percent.

This is not an argument of a return to Clintonomics. On the contrary, America needs not just a cyclical recovery, but a genuine economic restructuring. We shouldn’t try to return to the way things were, but to go forward to places we’re never been. We need to become a goods-producing nation again. So much so that we can replace some imports with domestic production and produce in excess of our needs. That’s the only way to pay down our enormous debt to foreigners without a major inflation. My only point is that prudent politics and sound economics can produce two radically different targets. Should the natural caution of politicians triumph, the best chance we may ever get to revamp the economy may be wasted. Please, Obamistas, aim higher!

Charles Blum

Labels: Jobs, Recovery, U.S.Economy