With the unemployment rate the highest it's been in 25 years, The Roosevelt Institute asked historians, economists and other public thinkers to reflect on the lessons of the New Deal and explore new, big ideas for how to get America back to work. TAPPED will be cross-posting the 10-part series with the New Deal 2.0 blog. In this installment, Marshall Auerback calls for government to step in as employer of last resort.
At 10.2 percent, unemployment is now at its highest level since 1983. Nearly 16 million people can't find jobs even though we are constantly being told that the worst recession since the Great Depression has officially ended. Yet instead of trying to revive the productive economy, most of the Obama administration’s recovery efforts still remain focused on cardio-shock treatment for Wall Street. The president still seems curiously hamstrung by his Herbert Hoover-like devotion to fiscal rectitude: he wants to spend but not add “one dime to the deficit,” as he announced at his congressional address on health care in September. He does this even though deficits are a natural consequence of slowing economic growth, falling tax revenues, and higher social welfare payments.
To all of the “Chicken Littles” (including the president), who fret about “excessive” government spending, we would simply point out that it is far better to deploy government spending in a way that reduces unemployment instead of settling for having it rise as a consequence of this spending.
We therefore suggest a new approach: Government as Employer of Last Resort (ELR). The U.S. government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. A sizable benefits package should be provided, including vacation and sick leave, contributions to Social Security and, most important, health care benefits, providing scope for a bottom-up reform of the current patchwork health-care system.
More about the ELR program after the jump.
--Marshall Auerback
Roosevelt Institute Braintruster Marshall Auerback is a market analyst and commentator.
