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  September 7, 2012

Does Obama Economic Policy "Just Need More Time"?

Jerry Epstein: The basic policies must change or recession and high unemployment will continue
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Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.


PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I'm Paul Jay in Baltimore.

The basic message coming out of the Democratic Party convention is that President Obama is leading the country down the right path to recovery, and what he needs is more time to continue the journey, and if allowed to do so, he will solve the problems, starting with unemployment.


BARACK OBAMA, U.S. PRESIDENT: I never said this journey would be easy, and I won't promise that now. Yes, our path is harder, but it leads to a better place.


JAY: Well, that was Thursday night. Friday morning, jobs numbers came out, and amongst other disappointing news for the country, and I guess also for President Obama, is the following. Hourly pay fell in August, manufacturers cut the most jobs in two years, and the number of people in the workforce dropped to its lowest level in 31 years. The government also said 41,000 fewer jobs were created in July and June than had been estimated.

So is this evidence that this path, this method is working?

Well, now joining us to talk about all this is Gerry Epstein. Gerry is the codirector of the PERI institute in Amherst, Massachusetts. He also teaches economics there. Thanks for joining us.


JAY: So, Gerry, what do you think? All President Obama needs is more time. In other words, the basic policy direction is correct.

EPSTEIN: The basic policy direction has to be changed. And, look, if you look at the Democratic convention, you compare it with what we heard out of the Republican convention last week, one can say this: Obama and the Democrats are at least going in broadly the right direction, whereas Romney and the Republicans are going to take us back to the 19th century, and along the way are going to destroy the whole New Deal and all the political power gained by progressives and unions and common people since that time. But if Obama keeps doing what he has been doing, if he doesn't take some radically—radical new measures and just stays on exactly this same path, we're not going to solve this problem.

JAY: So, I mean, his argument is is that he's going to boost American manufacturing, he's going to boost exports, and because he does all of this, it's going to lead to more job growth and a rebirth of American manufacturing. They give the—GM as the shining example: they saved the auto industry, and now they're going to save the rest of the economy. So why don't you buy that?

EPSTEIN: Well, first of all, he didn't talk about any specific policies or tools that he would implement to actually bring that about. If you want to increase exports, that's the question of the whole global economy—first of all, a question of the whole global economy expanding. And if you see what's going on in the rest of the world—in Europe, in China, elsewhere—there's stagnation, relative stagnation and crisis for the most part. So that's not under President Obama's control, number one.

Number two, aggregate demand, the demand for goods and services by households who are still indebted, who still don't have jobs, is dissipating. It's going down by the week. The only thing that can substitute for that is more government spending. And unless President Obama is willing to attack that, is willing to say, look, we have to expand government programs, we have to do something about the mortgage crisis and keep people in their homes and wipe away their debt, we have to have an infrastructure and a green-oriented jobs program, we're not going to get out of this crisis. The market, even with a little bit of nudge here and there, is not going to do it.

JAY: Well, in fact, he seems—still seems wedded to what he said at the very beginning of his presidency when it came to jobs and economic crisis, which was that the recovery has to be carried out through the private sector. And there's not a single mention of a kind of public jobs program, which a lot of people have been talking about as the only way to have some immediate impact on the situation. And as we've talked about and we've talked about with Bob, your colleague there, Bob Pollin, it's not that there isn't cash out there. The banks are sitting a trillion and a half cash. The corporations are sitting on mountains of cash. But they're not going to invest it. But he doesn't talk about any of this.

EPSTEIN: No, he doesn't. And I think he's still under the sway of advisers and business people who try to convince him, and apparently have, that the deficit is a major problem. And, in fact, in this context, that's not the major problem. So he's got to be a lot—he's got to get some backbone, as Joe Biden put it in—was it Joe Biden or [crosstalk]

JAY: Biden said he had a spine of steel. But I guess the question is: spine of steel for whom?

EPSTEIN: That's right. Well, he's got to get his backbone and say, look, if we want to get this economy going, we have to take some leaves out of the book of Franklin Delano Roosevelt and the New Deal, modernize them, and have some direct spending by the state and local governments to hire back teachers and hire firefighters and police officers, invest in infrastructure and green transition. The magic of the market is gone, and it's not going to come back until we get the government much more involved in these projects.

JAY: And there's another good report from AP on what's happened with public-sector jobs. AP writes that "When you count the 7,000 public-sector jobs lost in August, governments at all levels—federal, state and local—have slashed 670,000 jobs since the recession ended in June 2009. By contrast, private companies added 3.5 million jobs. It's the first time since World War II that governments have shed jobs this deep into an economic recovery. At this point—three years and two months—into the nine previous postwar recoveries, government jobs had risen an average 8 percent"—gone up 8 percent by this time. "This time they're down 3 percent." And again, President Obama more or less buys into this need for more efficient government and all the rest. And in other words, there's support indirectly, if not directly, for the cutting of public-sector jobs.

EPSTEIN: Well, I'm not sure he—this part of his program really supports that. But he needs to have the guts to say we have to have revenue sharing from the federal government to the states so that they can hire back these important public servants.

But let's not forget what the republic—about what the Republicans would do if Mitt Romney is elected and takes control and the Republicans take control of the House and the Senate. They are going to slash more jobs, they're going to slash unions, they're going to make massive tax cuts to the wealthiest and do very little to create jobs for the rest of us. They've completely ignored the issue of climate change, and in fact will move in the other direction, to accelerate it.

So, yes, I agree that Obama must get much stronger on these economic issues, indeed, much more radical. But to my way of thinking, American voters have an easy choice, but in a very difficult situation. The easy choice is: they can't vote for Romney, 'cause Romney is going to take us back and risk throwing the economy into another Great Depression. But it's a difficult situation, because unless Obama really changes his policies, the Democrats aren't going to be able to solve the problem either.

JAY: Yeah. I guess the issue is to have eyes wide open in a lousy choice, but to have eyes wide open about—.

EPSTEIN: Well, the issue is more than that. We the progressives have to really get more backbone also and really push hard to push Obama from the left, as we've been trying to do. But we have to redouble our efforts to do that. We know what to do economically. We have lots of programs coming out of PERI, coming out of other organizations, and we just have to keep the drumbeat going and just push as hard as we can on these.

JAY: Well, I guess part of the issue is is that in the first two years of the Obama administration, when they actually had control and didn't have the same kind of paralysis as afterwards, there was very little. There was, you know, a big stimulus, but it was clearly understood that stimulus would only last so long. And even President Obama, once that stimulus was over, gave up on the idea of more stimulus and bought into the idea of deficit reduction.

EPSTEIN: That's right. And what the Obama administration and the Democrats should do is just what they have been doing about so-called Obamacare. They're embracing it. If you watch the convention, they started talking about all of the important things that Obamacare can do. Now, of course, one doesn't need to necessarily agree with that. But when it comes to the stimulus program and the government expenditure and government programs to build infrastructure, etc., they have to take that on again, too, and they have to say, look, this is what we need; the Republicans have tried to destroy the possibility of doing this again; they try to block it at every turn; but we have to go back to this.

JAY: But maybe part of the problem is that there is a sort of instinct amongst ordinary people—and I personally think it's correct—that stimulus is not enough. You know, you can—eventually, every stimulus program's going to come to an end, and if wages don't go up, if there aren't policies that actually change demand that in a way will have a long-term effect, then it's going to be right back in the same situation. And there's again—like, in the last election we heard about the Employee Free Choice Act, we heard about things would make it easier for unorganized workers to get organized. Not a word of it in this convention.

EPSTEIN: That's right. And so we have to talk about inequality, about creating better jobs, raising wages, making it easier for unions to organize. All of these things are important. Regulate the banks and force them to make productive investments rather than speculation. We know the whole list of things that need to be done. And so unless Obama and the Democrats are willing to go there while they're moving in the right direction relative to the Republicans, they're not at all on the right path.

JAY: Right. Thanks very much for joining us, Gerry.

EPSTEIN: Thank you.

JAY: And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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