The current state of California politics can be summed up in a simple comparison: in the Republican gubernatorial primaries, we see one candidate promising that their first action upon becoming governor is to put 40,000 people out of work and the other complaining that this isn’t enough; in the Democratic convention, we see a party divided over whether to fight for majority rule for budgets or for budgets and taxes.
As a state, California seems caught between the scissors of an increasing need for public services to provide a basic level of social protection for the sick, the elderly and the poor and to restore our high-road, high-wage economy based on superior public education and green technology, and a paralyzed, undemocratic, and irrational political structure that is unwilling and unable to take the necessary actions to meet those needs.
We know that the strategies proposed by the GOP’s gubernatorial candidates won’t work because they are essentially a retreat of the last seven years of failed policies – Schwarzeneggerism without a human face.
Yet Democrats lack a forceful message about what we want to do beyond the immediate issue of the budget.
In part 1 of this series, I discussed the possibility of creating state economic recovery bonds that the Federal government could buy to lend its ability to deficit-spend in recessions to the state governments to counter-act their natural pro-cyclical tendencies. In part 2, I expanded on how we could adapt state governments to Keynesian economic policies by passing anti-recession budget reform initiatives allowing limited deficits during times of economic recession, establishing state banks to provide borrowing capacity for state governments, and establishing state job insurance programs.
So what remains to be done for Keynesian economic policy to be brought to the benefit of state government?
In part 1 of this series, I described how a Job Insurance system could work if it was organized nationally by the Federal government. However, as I suggested in 50 State Keynesianism, Part 2, it is also possible to run job insurance systems on a statewide basis if the Federal government balks at establishing a job insurance system.
Given the severity of the unemployment situation, and the likelihood that even should economic recovery begin in the second quarter and continue unabated that we will have persistent high unemployment, I believe that action on job insurance is necessary regardless of whether the Federal government can act.
This is a more thorough examination of the job insurance concept, done on a national level, but you can easily scale it to California or any other state.
Introduction:
In my previous posts about unemployment insurance reform and 50-state Keynesianism, I made brief reference to something called “job insurance.” Several people requested a fuller explanation, which is only fair considering that I had rather tacked on the idea without fully developing what I meant.
So here is a blueprint for how job insurance is supposed to work, as a major solution to the problem of declining job growth and increasing economic insecurity. To start with, let me explain what job insurance is not – it is not the temporary “transition trade assistance” (inadequate and ill-conceived at the best of times) referred to by most workers as “burial insurance.” It’s not the “wage insurance” that semi-penitent neoliberals have dreamed up to compensate for the fact that the new jobs being created by their post-industrial economic order pay less than the blue collar factory jobs of the past.
What job insurance is, in reality, is the missing link in our Social Security system.
Note: This is a cross-post from my group blog, The Realignment Project, and part 2 in a series about how to bring Keynesian economic policy to the state level.
Introduction:
In this post, I'm returning to a theme I initially explored in June, back when California was grappling with its budget crisis.
Now, after nearly two months of additional struggle, we finally passed a bill that cut $26 billion and raised no new revenue, and now we learn that the governor has possibly illegally cut a further $500 million, taking the axe to children's welfare ($80 million), health care ($400 million), Cal Grants (cut in half), HIV/AIDS Prevention and Treatment ($52 million), and domestic violence shelters (cut by 80%). In addition to the moral insanity of attacking the most vulnerable of our citizens at a time when they are most in need of support one must add the economic insanity of believing that you can reduce government spending by $31 billion in the course of a single year (including both the February and July cuts) and not effect the state's economic recovery.
Lest this be seen as merely a California problem, a recent report by the National Governors Association notes that the collective budget shortfalls of the fifty states comes to a collective $200 billion shortfall. Given that the total Federal economic stimulus for this year only comes to about $400 billion, we are forced to recognize that our system of state government budgeting and finance is creating a massive economic undertow, weakening the impact of Keynesian stimulus by cutting spending and raising taxes (although they've been doing a lot more of the former than the latter).
"Unemployment compensation, as we conceive it, is a front line of defense, especially valuable for those who are ordinarily steadily employed, but very beneficial also in maintaining purchasing power. While it will not directly benefit those now unemployed until they are reabsorbed in industry, it should be instituted at the earliest possible date to increase the security of all who are employed..." - Report to the President, Committee on Economic Security (1935)
In a previous post, I discussed the need to improve the payroll tax, and noted that one of the reasons we need to do this is to fix the unemployment insurance (UI). Our current UI system is fundamentally broken. As I wrote on the 12th, "at a time when nearly one in ten American workers are unemployed, only half of them qualify for Unemployment Insurance, to the extent that the program no longer adequately functions either as a safety net or an “automatic stabilizer.”"
If I didn't have the time and the space to say it at the time, let me say it now. The fact that a majority of workers are no longer protected, nearly seventy-five years after the passage of an act that was meant to protect every worker from" one of many misfortunes" of economic life, is a moral failure of the highest order. The idea that governors in America would reject stimulus funds in the middle of a recession because those funds would make it easier for temporary or part time workers to gain access to UI suggests the total moral bankruptcy of the American conservative movement. Not for nothing did FDR say:
"Governments can err, presidents do make mistakes, but the immortal Dante tells us that divine justice weighs the sins of the cold-blooded and the sins of the warm-hearted on different scales. Better the occasional faults of a government that lives in a spirit of charity than the consistent omissions of a government frozen in the ice of its own indifference."
In the spirit of the best 4th of July speeches, which like Frederick Douglass' peerless effort seek not to satiate with platitudes but rather to challenge and provoke, today I offer a reflection on America's past and its future.
At the end of "Resurrecting Henry George," I argued that a national housing assistance program would "help to make one more of FDR’s Second Bill of Rights, "the right of every family to a decent home," a legal reality. I would argue, and I will argue in future posts, that the longer-term mission of the progressive movement in America is (and has unconsciously been) the realization of the Second Bill of Rights." So today I intend to explain what I meant.
“O reason not the need! Our basest beggars Are in the poorest thing superfluous. Allow not nature more than nature needs, Man’s life is as cheap as beast’s.” (Lear, II iv)
The Problem:
If there is any one area of American life that best expresses the adage “poverty in the midst of prosperity,” it must be housing. Even as thousands upon thousands of homes now stand empty, vast swathes of speculative suburban developments along the highways and hills of California turned into ghost towns, homelessness has increased. In Washington D.C, the number of homeless families has increased in the last year by 15%, with similar figures being reported in New York City and other metropolitan centers. Even when the sub-prime boom was spreading home-ownership wide and far and actually beginning to make headway against the unequal distribution of housing in America, in 2006, 8.8 million households were paying more than half their income in rent (I was probably one of them). Major systemic problems (the lack of affordable housing and workforce housing near where people work, the need to in-fill versus sprawl, racial and class discrimination) were not being addressed, even when the market was flush.
It isn’t flush now. If ever there was a need for proof that “spatial mismatch” and “credit discrimination” exist, we can find it in the fact that at a time when thousands of houses are empty rotting shells, that people who want and need housing are being turned away by banks who have suddenly become paragons of fiscal rectitude.
At the same time, the national unemployment rate currently stands at 9.4%. Within the construction industry, unemployment stands at 21%. Within California, the situation is even worse, with an overall unemployment rate of 11.5%, and a construction industry that’s down 150,000 jobs from last year. While I fully expect that the stimulative effect of the American Recovery and Reinvestment Act of 2009 will begin to ameliorate this situation within the next six months, I personally was calling for an even larger jobs bill at the time.
I think we can tackle both problems at the same time.
