It's a Depression

Friday 03 April 2009

by: Robert Reich | Visit article original @ Robert Reich's Blog

The March employment numbers, out this morning, are bleak: 8.5 percent of Americans officially unemployed, 663,000 more jobs lost. But if you include people who are out of work and have given up trying to find a job, the real unemployment rate is 9 percent. And if you include people working part time who'd rather be working full time, it's now up to 15.6 percent. One in every six workers in America is now either unemployed or underemployed.

Tent cities are popping up around the country, like this homeless campsite near Sacramento, California, an area hard hit by the economic downturn. (Photo: Reuters)

Every lost job has a multiplier effect throughout the economy. For every person who no longer has a job and can't find another, or is trying to enter the job market and can't find one, there are at least three job holders who become more anxious that they may lose their job. Almost every American right now is within two degrees of separation of someone who is out of work. This broader anxiety expresses itself as less willingness to spend money on anything other than necessities. And this reluctance to spend further contracts the economy, leading to more job losses.

Capital markets may or may not unfreeze under the combined heat of the Treasury and the Fed, but what happens to Wall Street is becoming less and less relevant to Main Street. Anxious Americans will not borrow even if credit is available to them. And ever fewer Americans are good credit risks anyway.

All this means that the real economy will need a larger stimulus than the $787 billion already enacted. To be sure, only a small fraction of the $787 billion has been turned into new jobs so far. The money is still moving out the door. But today's bleak jobs report shows that the economy is so far below its productive capacity that much more money will be needed.

This is still not the Great Depression of the 1930s, but it is a Depression. And the only way out is government spending on a very large scale. We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce.

Energy independence and a non-carbon economy should be the equivalent of a war mobilization. Hire Americans to weatherize and insulate homes across the land. Don't encourage General Motors or any other auto company to shrink. Use the auto makers' spare capacity to make busses, new wind turbines, and electric cars (why let the Chinese best us on this?). Enlarge public transit systems.

Meanwhile, extend our educational infrastructure. So many young people are out of work that they should be using this time to improve their skills and capacities. Expand community colleges. Enlarge Pell Grants. Extend job-training opportunities to the unemployed, so they can learn new skills while they're collecting unemployment benefits.

Finally, accelerate universal health care.

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Comments

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It's all true what you wrote

Sat, 04/04/2009 - 22:46 — Unplugged (not verified)

It's all true what you wrote on 'Sat, 04/04/2009 - 19:27' but if U.S. Government allowed the insolvent institution go bankrupt as most of us would like the United States would turn into something between Zimbabwe and Brazil so as of now the government needs to use all it's tricks to keep themselves in power and slow down the death of an empire. Btw adding (printing) money is a last resort move and if this doesn't work WWIII will overtake our planet.

Hey yeah! hey Yeah! so very

Sat, 04/04/2009 - 21:32 — Anonymous (not verified)

Hey yeah! hey Yeah! so very true. The worst of it is that there is no accountability for the fraud perpetrated against the American people and that the people are having to bail out failed deregulation. Geithner et al perpetuates failed ideology with failure their to let banks fail and all to protect the political elite 401 K and punish labor. It is as if all this happened because of Main Street bubble wealth which is part of the myth of a consumer society. Bottomline America cannot spend its way out of a Depression, there is no money to do that. Our government has failed its people by not protecting the welfare of the stateadditionally affecting the world over. The type of Capitalism we have seen previous to this point must die in order for the phoenix to rise from the ashes of a brave new renewable world of the next centuries technology which will allow us to shift the socio-economic paradigm. Until we muster courage to see the truth and act upon what is real and to make the change people need we will only continue to spiral down further. The truth about of the abyss is it is bottomless. It looks as if the people will have to rise up to force the politicos to see the light, obviously, they are not listening.

""Liar, Liar," are you

Sat, 04/04/2009 - 21:12 — David (not verified)

""Liar, Liar," are you responding to the article above your post? • You accuse Mr. Reich of "not...comprehend[ing] the size or true nature of the looming disaster," yet the very title of his article is "It's a Depression." • You accuse him of "equat[ing] the national interest with the interests of these [politically dominant multinational corporations," yet he specifically wrote "We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce." • What's more, I believe reflects exactly what is needed: • "Energy independence and a non-carbon economy should be the equivalent of a war mobilization. Hire Americans to weatherize and insulate homes across the land. Don't encourage General Motors or any other auto company to shrink. Use the auto makers' spare capacity to make busses, new wind turbines, and electric cars. (Why let the Chinese best us on this?) Enlarge public transit systems. • "Meanwhile, extend our educational infrastructure. So many young people are out of work that they should be using this time to improve their skills and capacities. Expand community colleges. Enlarge Pell Grants. Extend job-training opportunities to the unemployed, so they can learn new skills while they're collecting unemployment benefits. • "Finally, accelerate universal health care." • Sorry, "Liar, Liar"...you seem to have missed the point entirely.

Speak out brother! This

Sat, 04/04/2009 - 21:00 — Anonymous (not verified)

Speak out brother! This could be the beginning of the beginning!

"Capital markets" need to

Sat, 04/04/2009 - 19:27 — Liar, Liar, Pants on Fire... (not verified)

"Capital markets" need to "unfreeze"?? More "stimulus" needed?? How very "caring" to focus on the jobless. At least he has an inkling that the $787Bn. hasn't resulted in many jobs. Why? Because the Market Makers in the "capital markets" are bankrupt, and the Treasury is being looted by the owners of the Federal Reserve Bank, while the viability of the US$ is being destroyed, along with the nation's ability to finance its legitimate operations. If we just let the losers go bankrupt and the gamblers go broke, the assets and properties that "shake loose" will be put back in play. So much of the "bubble wealth" was and is imaginary that the US Gov't. should not be trying to protect its "owners" from loss. Mr. Reich may be more part of the problem than part of the solution. His ideas do not seem critically relevant to the need to get the dead wood out of the system, take the monstrous losses, and move on. The government needs to allow this to happen. Some new programs are, indeed, indicated, but as adjunct activity, not the main thrust, and NOT with newly-printed money. The US Treasury and the credit worthiness of the nation should not be squandered on private banking and insurance business. Mr. Reich knows this. He does not seem to comprehend the size or the true nature of the looming disaster which now threatens the nation, itself, as well as that bunch of politically dominant multinational corporations. To equate the national interest with the interests of these corporations will soon be seen as the greatest folly in the history of America.