The Road to More Jobs (guest post)

From a New York Times op/ed piece today:

"How different would conditions be today economically and politically if unemployment were 7 percent instead of its current 8.2 percent? For one thing, some two million unemployed workers would have jobs, and the rate of economic growth would be comfortably above 2 percent, instead of below that pace. This scenario could have been possible if federal aid to states had been bolstered, saving hundreds of thousands of public-sector jobs.

Mr. Obama can make a convincing case that his policies — especially the stimulus and auto industry rescue — helped cushioned the effects of the recession he inherited, which pushed the jobless rate from an already elevated 7.8 percent in January 2009 to 10 percent by October 2009. It has come down, more or less, steadily since then. But it is still higher than when he took office — a point that Mitt Romney and Congressional Republicans have seized upon as evidence of failed policies.

Actually, it was the Republicans’ relentless opposition to constructive policies that has kept unemployment high, from their resistance to the 2009 stimulus to their blockage of Mr. Obama’s proposed $450 billion jobs bill in late 2011. Federal aid to states was a mainstay of both of those efforts. As the stimulus ended and further aid was delayed and denied, the effect on state budgets — and on jobs — has been catastrophic.

A recent analysis by the Economic Policy Institute shows that the loss of public-sector jobs, largely because of state budget cuts, has been the biggest hit to job growth over the past three years.

The direct jobs lost — 627,000 since June 2009 — understates the drag because population growth alone suggests that the public sector should have added nearly 500,000 jobs over that time simply to restore government employment to its norm of the last 20 years. In all, the public sector is coming up short by 1.1 million jobs, including positions for teachers, social workers, public health officials and other professions that would have been filled by many of today’s unemployed college graduates.

Worse, the public-sector gap of 1.1 million jobs has translated into some 750,000 lost jobs in the private sector, the result of contractors losing government business and less spending by laid-off government workers. In addition, another 400,000 or so jobs have been lost because of cutbacks in state aid to the poor and unemployed, which reduce consumer spending.

The effects from an ailing public sector are profound because state and local spending on employees, contractors and beneficiaries reverberates swiftly through the economy. When that spending is depressed, the entire economy suffers.

The bottom line of the institute’s report is that if it weren’t for state and local budget austerity, the economy would have 2.3 million more jobs today, and the unemployment rate would be around 7 percent, not 8 percent. The lesson is that the best and easiest way to reverse job losses would be for Congress to provide fiscal aid to states. Thwarting such aid, as Republicans have done, is a way to keep unemployment elevated and their hopes to win the White House alive. Jobless Americans, struggling businesses and hard-pressed communities are hostages in the fray."

Link to original post: http://www.nytimes.com/2012/07/12/opinion/the-road-to-more-jobs.html?_r=1&smid=fb-share