6-10-08, 9:28 am
Unemployment rose in May, from 5% to 5.5%, the largest one month jump in over 20 years. The national average for a gallon of gas reached $4 this week, with the upward spiral expected to continue. Those of us who visit supermarkets find that what are now advertised as 'sale' prices for basic foodstuffs are above what the regular prices were a few months ago. Meanwhile, the Bush administration is still denying that a 'recession exists' and the Republican presidential candidate John McCain is still talking about suspending the federal gas tax and addressing unemployment and wage stagnation by advocating new corporate tax cuts.
Is this just a recession? First, we should remember that the difference between 'recessions' and 'depressions' has always been artificial. At the beginning of the 1930s, 'depression' was a euphemism for what had previously been called 'panics' and 'crises,' a soothing public relations term until the term came to represent what was really happening, that is catastrophic mass unemployment, wage decline, and general decline in living standards. By the late 1930s, the term 'recession' came into general use as an alternative to 'depression.' Economists developed the view, at that time, that unemployment and other vital economic statistics had to be declining for a set period of time for the economy to be first in 'recession' and then in 'depression.'
By those standards, we may be experiencing some new. As Jared Bernstein, a labor oriented economist noted, 'we simply have never had five months of net job losses without being in a recession.' Economists who work for pro-business and Wall Street firms are admitting that the combination of huge gas prices and a bad 'labor market' is creating general pessimism and fear as reported by public opinion surveys that is significantly greater than in the last two recessions.
Still, there are many 'traditional' dimensions to the present crisis. About 1.5 million unemployed workers face a cutoff in their unemployment insurance benefits, which progressives in Congress appear prepared to extend for another 13 weeks. Such a measure faces a potential presidential veto, because, Bush administration spokespersons contend, unemployment benefits have never been extended with the unemployment rate 'so low.'
Another 'traditional characteristic is that joblessness hits ethnic and racial minorities and youth hardest. Unemployment among African Americans jumped to 9.7%, more than twice the jump in the general unemployment rate. Unemployment among people between ages 16 and 19 rose by 3.3 %, from 15.4 to 18.7%. Of course, the 'discouraged workers' or long-term unemployed are no longer counted once their benefits expire. Unofficial estimates put this number in the millions. The official story is that they are 'no longer looking for work' since they have failed to find it, a Catch 22 moment if ever there was one.
Economists have also pointed to another factor exacerbating the situation. Many companies, after years of job reduction through attrition and downsizing, simply can't 'shrink payrolls' through layoffs much more. Instead, they are cutting hours of employees and of course cutting their wages in the process.
Comparisons to past economic downturns, make today's woes seem more like the Great Depression than the grinding crisis of the 1970s. In the 1930s, unemployment shot up and the majority of the employed faced significant wage reductions. When the 'stagflation' crises of the 1970s hit, about one-fourth of the labor movement was unionized, personal consumer debt was much smaller, the U.S. was far less dependent on oil imports, and was still the leading creditor nation. Today, by contrast, the union density is less than half of what it was in the 1970s and less than one-third of its peak in the early post World War II period. The national debt is more than 10 times what it was in the 1970s, consumer debt has a crippling effect on the economy, and the U.S. is of course the world's largest oil importer and debtor nation.
Not only is the U.S. in a significant recession, but it will also require transformative economic policies to address this crisis and keep it from become the 'great depression' of the early 21st century.
It will take, first of all, a national administration that offers a level playing field for the trade union movement to organize unorganized workers. Policies that relieve massive consumer debt not unlike the New Deal-era's FDIC, the Commodity Credit Corporation, and other programs need to be put in place to resolve the banking and mortgage crises. It will take a national energy policy that begins to both develop rapidly alternative energy sources and also public transportation policies. And it will take at the least a revival of progressive tax policies.
Barack Obama is coming forward with alternative energy proposals. He has also advocated eliminating the Bush tax cuts on the wealthy (although he is still a long way from a progressive tax program). He has also advocated a long-term 'green jobs' creation policy, in which the government invests in creating millions of new environmentally positive jobs. Obama is moving in the right direction, and is keeping, as Franklin Roosevelt did, his options open. Indeed, change and bold progressive polices are needed to address what is clearly becoming the largest general economic crisis in decades.
McCain, on the other hand, is knocking his head against the dead end that is the Bush administration and 30 years of reactionary polices that favored corporations and the rich, denied the seriousness of global climate change, and weakened the rights of workers.
