Conventional Wisdom

Restoring jobs to pre-recession levels is a “trailing economic indicator.” This means that employment figures are among the last to improve following a major economic downturn. In the post-WWII era, the time following the beginning of a recovery (end of the recession) to achieve these former employment levels began with a six month period, slowly increased until the last number require 39 months, with consulting firm McKinsey suggesting their projections, assuming that there isn’t another downturn, require at least 60 months for the same restorative timing to happen from the current malaise. What happened?

With the expansion of the worldwide web and the steady upgrading in worker skills around the planet, it has never been easier for American factories and service providers to follow the cheapest labor to get the job done right. Additionally, even in the U.S., in industries from car-making to mining, increasingly automated and technologically-advanced mechanization has reduced the number of required workers and elevated the skills required for those who remain. So the last employee to be added in the U.S. is going to be the average American who lost the job in the first place, assuming that the lost job has not been rendered completely obsolete in the interim. The marketplace has removed many businesses that simply were not keeping up with the times… as well as the jobs that went with those firms, and the oversupply of housing holds back residential construction in a big way.

So you have conventional wisdom from both sides of the aisle, spouting what they believe to be the “only solutions” to the employment crisis. Republicans tout supply side solutions – creating a more favorable business climate reduce taxes on the wealthy whom they believe create jobs, directly incentivizing job creation with favorable tax provisions and reducing regulations that they believe hinder business with costly restrictions and impose requirements to support a social network (like “Obamacare”) that increases the cost of adding employees. Democrats prefer attacking the problem from the demand side – noting that since the lack of consumer liquidity and confidence have not generated enough demand from the private sector for employers to have the confidence to add employees to make more products and provide increasing services, it is the government that needs to step in to provide that demand until confidence is restored to the system. The Republicans justify the tax decrease by cutting “entitlements and social mandates” – somehow believing that military spending should remain sacrosanct – while Democrats suggest that the wealthiest sectors of our society should pay more tax. It is an imperfect storm.

We are still teetering, facing many issues that were created in the past decade which we cannot reverse and an unstable economic situation overseas, particularly in Europe, over which we have no control. But perhaps the solution lies in applying elements from both the Democratic and the Republican side in a combined attack on our employment and underlying housing issues.

On the issue of regulation, it is probably necessary differentiate between regulations that are geared toward limiting or preventing the kinds of financial excesses that brought us down in the first place and those that impose layers of approvals and procedures – many of which are imposed at the state and municipal levels – without much of a concomitant offsetting public benefit. Looking around at the wildfires and the extreme heat and drought across the United States, there are still strong arguments for environmental regulations. However, the argument that we are running out of fossil fuels appears to be dead on arrival these days, as massive new oil reserves are being identified in places like Brazil, Israel and Canada. The issue has now focused on reducing the impact of using such fuels.

On the issue of containing social benefits, the first and most obvious issue has to be at every level of government pension determination. We need federal and state systems that can shift unfunded pensions into structures that can someday provide retirement to the relevant workers without breaking the backs of those who have to work currently to service these past obligations. Retirement ages need to be raised, benefits determined by how much money is in a contribution account as opposed to fixing retirement as a defined benefit based on the earning power in later years. Seniority systems that don’t reduce pay levels or allow replacement for workers that cannot sustain required object performance standards should be more flexible; we need the best and the brightest to stay and worst and the dimmest to leave.

On the issue of government spending, we need to be aware of several key issues. First, certain kinds of spending (investments really) generate long-term direct economic benefits because they increase efficiency, provide new economic opportunities and up-grade value-producing skills. Second, other expenditures are more like “consumables” that make life more pleasant but do not help the economy in the longer run. Staying healthy and fighting off attacking enemies are probably pretty high on the list of desirable, but cost consciousness should apply here as well. Third, we have actually reduced spending in areas where those direct economic benefits will be generated (and we will desperately need them) – cutting our infrastructure repair and construction expenditures to about half of pre-recession levels, slamming education – even with a rapidly growing population – by a 13.7% reduction (with more to follow).

These short-sighted policies threaten to keep the United States on a downward spiral, dropping our competitiveness and standard of living. I’ve blogged constantly on these subjects, and by now you know that I do not believe that our nation can survive without vastly improving our infrastructure, education systems (which continue to fall when measured against international standards) and government-funded research. By combining policies from both sides of the aisle as noted above, we actually maximize what we can do to restore American employment. Good ideas need to be deployed no matter where they come from.

I’m Peter Dekom, and it is clear that we need to lose partisan rhetoric and begin working together or face losing what was and is a great nation.