One relatively simple measure is to subsidize employers who are willing to reduce hours rather than lay
people off. Germany has
demonstrated the success of this approach over the last couple of years. Unemployment in Germany was 7.4% just before their
recession began in the third quarter of 2008.
Today it is 6.7%.
The idea is straightforward: employers who are faced with reduced demand for their products or services can either lay off workers or reduce hours. If they reduce hours for any worker, the German government largely replaces the pay lost because of these reduced hours. The worker keeps her job, with reduced hours -- but her monthly pay remains much the same.
With all this talk now about Democrats and Republicans
"reaching across the aisle" and working together, a program that is acceptable
to a conservative German government ought to have bi-partisan appeal here. The government can use unemployment insurance
funds to cover much of the cost, and seventeen states in the U.S. already offer such
work-sharing programs. But they are
under-funded and participation is small as a result. But this can be changed.
Economist Dean Baker estimates that this program can create three million jobs at a cost of $68 billion. That is less than one-tenth of our bloated Pentagon budget. Imagine a national poll where voters were to choose between continuing to occupy Afghanistan versus creating three million jobs? We all know how 95% of Americans would vote in such a poll.
Another proposal that would help boost the economy, and wouldn't cost the taxpayers anything would be to:
Allow homeowners who are underwater on their mortgages to become long-term renters.
An independent appraiser would set the fair market rent for their home, which the bank would then be legally required to honor. Millions of homeowners who bought homes at bubble-inflated prices would then see a sizable reduction in their monthly housing costs. Others would find that their bank, not wanting to take on the burden of becoming a landlord, would suddenly be ready to negotiate a reduced mortgage payment. Such a program would free a lot of people from the prolonged stress and uncertainty of unpayable debt. It would also boost consumer demand (and he job creation that results) as the newly saved money would be available for other spending.
It is, of course, new demand for goods and services that is what's needed to achieve the
growth that will boost the economy and provide the jobs America so
desperately needs. It's obviously not
enough for the President to kiss up to big banks and corporations by appointing their friends and
representatives to high places, or by slathering more tax breaks on them. Our corporations are already sitting on more
than $2 trillion of cash, so what good is another tax break going to do? Once again, the simple reason they are not
expanding or hiring is that there is not
enough demand out there for what they already have the manpower to produce. In other words, the bursting of the housing
and commercial real estate bubbles will limit consumer demand for years to come
-- unless ways are found to significantly
increase middle class and working class buying
power, and unless we start producing more of our goods domestically, instead of importing them from
China!
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