I know what you're thinking: We bailed out the banks, the automakers and American International Group. We passed a $787 billion recovery act earlier this year. The budget deficit for 2009 exceeds $1 trillion. How can deficit reduction not be Job No. 1?
There are two reasons. First, this jobs crisis -- the worst one since the Great Depression -- is an unmitigated disaster for the nearly 16 million Americans who are out of work and their families. Millions of Americans have seen their hours or their wages cut. Over the next year, one-third of the workforce will become unemployed or underemployed at some point.
In an Economic Policy Institute/Hart Research survey from late September, 57 percent of respondents said a family member or friend had been laid off during the recession. This is not an abstraction for most people -- these are our friends, neighbors and family members we're talking about.
Second, the simple fact is that we can't address the deficit without first putting people back to work. The main reason we have a large deficit is because we are having a severe recession with the consequent loss of revenue and extra expenditures. The path to getting the deficit under control starts with having more people earning paychecks and paying taxes.
In the short term, large-scale job creation will require us to commit to spending that will further increase the deficit for the next two years. If we do nothing and allow high unemployment to persist, it will impose much higher costs on future generations than any additional temporary spending on job creation would impose.
High unemployment will mean that the generation of young people entering the workforce now will see lower earnings over their entire careers. The poverty and other consequences of persistent high unemployment, such as housing problems and parental stress, will permanently damage the educational achievement of affected schoolchildren. Curtailed investment and innovation during the recession will limit our economy's future growth potential.
To quickly create millions of new jobs, the Economic Policy Institute has proposed the American Jobs Plan. The plan would create jobs directly through public service job programs and a program to rehabilitate and modernize schools. It would create jobs by spurring economic demand through continued assistance for unemployed workers (who then have money for necessities, which they spend quickly and which generate jobs throughout the economy) and increased aid to state and local governments (which supports jobs for those in both the public and private sectors who deliver needed services, from education to health to policing). And the plan would encourage private-sector employers to hire workers by giving them a job-creation tax credit.
All told, these proposals would create at least 4.6 million new jobs in one year. We'd still have a long way to go to get unemployment back to the level that prevailed before the recession began in 2007, but this plan represents an essential first step. It would cost $400 billion in the first year, but we can recover all of the plan's costs within 10 years by imposing a Wall Street sales tax -- a modest tax on the sale of stocks and other financial products.
The recovery act that President Obama signed earlier this year was crucial in slowing the economy's rapid descent -- as bad as things have gotten, they'd have been far worse, with many more jobs lost, without the recovery act. Hopefully Obama will emerge from the jobs summit confident in his early success but intent on building on it.
The path to a better future, including a better fiscal situation, starts with creating more jobs.
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Lawrence Mishel is president of the Economic Policy Institute, which earlier this week unveiled its American Jobs Plan, available at www.AmericanJobsPlan.org.
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OTHER VIEWS ON THE JOBS SUMMIT: Newt Gingrich and Dan Varroney offer a three-step job creation plan -- spending cuts, tax cuts and domestic energy production. Meanwhile, economist Richard Vedder says the best course of action right now is to do nothing -- the jobs market is poised to recover on its own.
