Features » February 24, 2004

Jobs Not Well Done

Employment issues may make or break campaigns

By David Moberg

The presidential election this fall may hinge on what happens to people like John Mahoney and Robert Daems. Both are in their 50s, lost their jobs in December 2002 and still haven’t found work. If President Bush continues to oppose renewing federal extended unemployment benefits, their compensation soon will run out.

“I don’t think the Republican Party even cares,” says Daems, who worked for Intel as a systems analyst in Phoenix. “I even feel the Democratic candidates don’t have an understanding of what’s happening out there.”

A Democrat could win in November, however, if he can prove to Daems and other voters that he understands and can manage the economy better than Bush. Polls show that the economy is now the top issue with voters, roughly half of who rank unemployment as their major economic concern.

Both parties show strengths—the Democrats on Social Security, healthcare and the federal budget and Republicans on national security and terrorism—according to a review of polls by Democracy Corps, a Democratic strategy group.

But there is no clear advantage for either party on jobs and prosperity.

Despite signs of growth and a stock market rebound, this has been the weakest economic recovery since World War II. Even though the Bush recession officially ended in November 2001, the economy continued to lose about 700,000 jobs through last September. Jobs have grown by an average of 76,000 a month since then, but that’s still half the number needed to account for new workers. It’s also a far cry from what Bush promised his tax cuts would deliver. The Economic Policy Institute (EPI) calculates that Bush has fallen short by 1.85 million jobs.

Rigged numbers

The traditional signal of distress—the unemployment rate—has been surprisingly low, dropping by one-tenth of a percent in January to 5.6. But the figure is misleading. Many discouraged workers have simply dropped out of the labor force. The percentage of men in the workforce, for instance, dropped by about as much in the last three years as it did over the previous 20. At the same time, workers like Daems and Mahoney—an auto parts factory worker in Battle Creek, Michigan—are remaining out of work much longer than normal and long-term unemployment, more than 27 weeks, has increased most rapidly for workers with at least a college degree. As a result, a record number of unemployed workers in January lost unemployment benefits, according to the Center on Budget and Policy Priorities, plunging roughly half into poverty.

But the problem isn’t simply the loss of 2.4 million jobs since the recession started—the greatest sustained job loss since the Great Depression, according to EPI—and anemic jobs creation. There’s also a shift for the worse in the kinds of jobs available. On average, the jobs being lost pay 21 percent more than those in growth industries, says EPI researchers Michael Ettlinger and Jeff Chapman.

The long period of job loss also is taking its toll on people who are still employed: Real hourly wages fell for middle- and low-wage workers last year even as economic output grew, says Jared Bernstein and Lawrence Mishel of EPI. But not everyone lost out. Profits have grown dramatically, claiming a share of the growth in the corporate sector more than double the average of past recoveries.

Skewed stimulus

This reprises a familiar theme for the Bush regime: Most workers are worse off whether they have a job or are unemployed, and big corporations are profiting. But it should be no surprise. It was designed that way.

“When they passed the tax cuts, every economist argued this is not how you structure a stimulus,” Bernstein says. “You can’t expect to stimulate job growth by cutting taxes on dividends and capital gains and failing to implement direct spending on job creation, fiscal assistance to the states and other spending.”

There were several fatal flaws in Bush’s plan, but it was not the swing from a big budgetary surplus to deep deficits. It makes sense for the federal government to run a deficit in a recession to provide economic demand that sustains employment. But the Bush tax cuts were skewed to the rich, not low- and moderate-income workers and the unemployed, who needed the aid and would immediately spend it. Bush was simply determined to cut taxes for the rich. First he justified it as returning the surplus to taxpayers. When the recession deepened, he justified the same policy as a stimulus.

Instead of tax cuts, the government should have directly aided the states more and invested in public needs that build economic strength. Finally, the stimulus should have been immediate and short-term. Even during a hoped-for recovery, creating endless huge budget deficits solves nothing.

Bush’s disastrous policies largely are responsible for the long jobless recovery, but some analysts recently have argued that fewer jobs have been created because productivity has grown so fast. But Bernstein notes that productivity has been growing only slightly faster than normal. The problem is not productivity, he argues, but a demand for goods and services that is far below the average.

Certainly, productivity increases do not adequately account for the 42 consecutive months of manufacturing job losses—2.6 million gone since Bush took office. Global economic forces play a role. For example, some stimulus leaks to other countries as Americans buy imports. The trade deficit has grown sharply since 2000, from 3 percent to 5 percent of gross domestic product, reflecting a loss of potential jobs in the United States.

Dan Luria, vice president of the Michigan Manufacturing Technology Consortium, argues that there have been real productivity increases, even in the service sector, but some of that reflects improperly measured use of cheap inputs from abroad.

In addition, nobody accurately measures how many jobs are lost to offshoring. But even as demand grows, multinationals are shipping jobs out. In January, for example, Electrolux announced that it would move most of the 2,700 jobs at its Greenville, Michigan, refrigerator factory to Mexico. More than 8,000 jobs in the Greenville area are likely to be lost as a result.

Mounting debt

Several indicators suggest there may not be the turnaround in job creation Bush wants for his reelection campaign. The administration continues to rely on tax cuts for the rich that already have proved ineffective. Investors also are wary that persistent deficits and a declining dollar will lead to inflation and higher interest rates, which would slow growth.

With real wages declining for many, workers won’t be able to spend more and stimulate job growth. Already many households are dangerously deep in debt, since home refinancing and other debts have been major props to the economy in recent years. These debt-ridden families will be vulnerable to rising interest rates and any bursting of the housing bubble.

Even with continued growth, Bush almost certainly will be running as the first president since Herbert Hoover to finish a term with a job deficit.

Democratic alternatives have had their own flaws. Howard Dean overemphasizes the dangers of deficits, making his record of balancing Vermont’s budget and a pledge to balance the federal budget the economic centerpiece of his campaign. John Kerry relies too heavily on tax cuts, such as his proposals to cut business taxes for creating new jobs rather than direct public spending to stimulate the economy.

But a modestly populist economic alternative is emerging from the Democratic presidential contest, including proposals for creating fairer trade, supporting unions, aiding small businesses and manufacturing, restructuring taxes more progressively, spending more for education and research, investing in energy efficiency and alternative energy, budgeting more responsibly, improving infrastructure and moving toward universal healthcare.

It’s not adequate, by any means. But it beats Bush’s policy, both in fairness and economic effectiveness, and it may politically beat Bush as well.

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• Reader Comments

  I remember the days when I was a kid and I would go see my dad at his job.  He was a manager at a motor manufacturing plant.  I remember the pride that the people had to be (1) working (2) making a halfway decent wage in this area.  Now the plant that he works for cannot even afford to keep him on, and he has been unemployed since October.  1200 manufacturing jobs have been lost in Western North Carolina since last month.  I can imagine that this is a common trend among similar-sized cities across the US.  How are these people going to make it, especially the ones that are giving up?  How are families going to survive when the last unemployment check comes in? Bush lightly says that we need to advance our skills.  How are we going to do that when college tuition is rising? The rich are getting richer…Is it any suprise W wants those tax cuts made permanent?  There needs to be a reassessment of the relationship between corporate America and the local communities.  Greed has taken this administration and it’s corporate partners because they have the power, but I don’t think they care about the consequences of what it is doing to our country.  There is such a polarization between the lower/middle-class and the upper class, and GW thinks that you reap what you sow.  Well, let’s not give that SOB another 4 years and add his presidency to the pool of 3 million lost jobs!

  Posted by Bob on Feb 24, 2004 at 8:21 PM

  Thanks for writing a great article.  I am a man in my early 40’s, have worked 10 years as a Chief Information Officer for various companies, and… I have been out of work for two years.

  I not only voted for Bush in 2000, I campaigned hard for him.  I have voted Republican all of my life.. but will vote Democrat in November.

  Bush has turned his back on middle americans… and I dont care what anyone says.. the record speaks for itself.. and it doesnt speak well of the job that Bush has done.  People are out of work… the budget deficit is met with disdain.. we have botched foreign policy.. .but most importantly, we have sent brave young kids to fight a war, that in the end, seems to be pointless..

  George W. Bush will be remembered as one of the worst presidents to ever hold office.

  Posted by Tracy Vance on Feb 24, 2004 at 9:34 PM

  I worked at the same manufacturing plant for over 10 years. I had a union job manufacturing dildos and other sex toys for a large company. Unfortunately, my job was shipped over seas to China. I have seen this trend throughout America. I, like many blue collar Americans, voted for Bush in 2000. However, I will not vote for him again because he hasn’t done anything to help working Americans. His tax cuts have only benefited the rich and I’m still out of work. It’s funny how must of the people who vote for Bush (like myself) end up getting screwed the most by his economic policies. This election, I will be voting for Kerry.

  Posted by Jenny Wilkenson on Feb 24, 2004 at 10:11 PM

  I agree with Jenny. Bush’s economic policies end up hurting the people who vote for him the most. Unless of course, you are extremely rich. I don’t think he will be re-elected. He is a liar and has no credibility. He lied to take over Iraq. In fact, he sign an order to go to war in Iraq 1 year prior to going to war. It just proves the administration was hell bent on going to war to take over Iraqi oil. And look at gas prices now, this summer its expected to hit a record high, $3.00 / gallon. Thanks Bush, you invaded Iraq, a country sitting on 300 billion barrels of oil and we are paying a ridiculous amount for gas. What a dumb ass.

  Posted by Letral Cammal on Feb 24, 2004 at 10:18 PM

  Hmmm.. Interesting. The anti-bush take here due to his typical republican “help the rich” approach seems odd. What did you expect? Since when have the repugs cared about the economic status of the poor and the middle class?
  But let’s be fair—the current economic malaise in fact started before bush took office and is endemic of larger economic issues/problems. criticism of bushit and co. not telling us the “big picture” truth should be just as hot as their inability to provide viable solutions.

  Posted by Anthony on Feb 25, 2004 at 2:47 AM

• extended discussion >>>Continued...

  Discussions with more than 5 comments are continued on our special discussion page to encourage continuity and ease of use. There are currently 20 posts.

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