Democratic Party NGO Presents Far-Reaching but Problematic Jobs Program

Dean Baker of CEPR discusses problems involving the Center for American Progress’s proposal for an ambitious federal jobs guarantee program

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GREGORY WILPERT: It’s the Real News Network. I’m Gregory Wilpert coming to you from Quito, Ecuador. The Democratic Party [inaudible 00:00:12]Center for American Progress recently made an important push for a policy of federal jobs guarantees. This is a policy by which the federal government would hire large numbers of workers to reduce unemployment while promoting various public projects. The Center for American Progress estimates that this program would cost less than a quarter of President Trump’s proposed tax cuts. Also, it compares the proposal to the post-war Marshall Plan in Europe and the Works Progress Administration that Franklin Roosevelt introduced as part of the New Deal in the 1930s, which funded a large public works project in order to overcome the Great Depression. Chief Editor of the Real News Network, Paul Jay, asked in 2016, presidential candidate Senator Bernie Sanders, last year, whether he would support a federal jobs program. Here is the clip.

PAUL JAY: Would you consider a Roosevelt style direct federal jobs program? Perhaps targeting the inner cities-

BERNIE SANDERS: Absolutely!

PAUL JAY: Like Baltimore?

BERNIE SANDERS: Absolutely!

PAUL JAY: Cuz when its come through the cities and the states, a lot of times-

BERNIE SANDERS: Now that’s right.

PAUL JAY: People don’t get the money.

BERNIE SANDERS: That is exactly right. There are two elements. Number one, we have to rebuild our crumbling infrastructure. And that is our roads and our bridges, our water systems, our waste water plants, airports, rail, etc. etc. But second of all, when we talk about job creation the federal money has got to go into those areas that need it the most. And what is happening in the cities all over this country is a story that is not being effectively told. But we have crisis after crisis after crisis, crumbling public school systems, high unemployment, mass incarceration rates. We’ve got to start focusing on rebuilding inner cities in America.

PAUL JAY: So a direct federally funded jobs program is on the table with you?

BERNIE SANDERS: Absolutely.

GREGORY WILPERT: Joining us to analyze this idea of federal jobs program is Dean Baker. Dean is the co-director of the Center for Economic and Policy Research in Washington, DC. And he is the author of several books. His latest being Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Also, Dean recently published an article for Truthout in which he discusses the jobs proposal. Thanks, Dean, for joining us again.

DEAN BAKER: Thanks for having me on.

GREGORY WILPERT: So, the idea of a federal jobs guarantee is that, it’s a fairly old idea actually as I mentioned in the introduction. The economist John Maynard Keynes once remarked that “if our government were to bury money in the ground and sell mining licenses, it can create employment and that such a project would cost less than the unemployment [inaudible 00:02:36].” What do you make of this argument and of the proposal that the Center for American Progress has presented?

DEAN BAKER: Well, it’s important to make a distinction here. On the one hand, you can talk about jobs programs, which I think are very good ideas. I’ve written about that, as have many other people obviously. But there’s a separate point and this is what the Center for American Progress is actually proposing, was a jobs guarantee. Which isn’t necessarily a bad idea but we have to understand it’s a very, very different concept. And when I was writing my piece, I was looking at their analysis which obviously is cursory. But there’s some very, very big issues that they don’t deal with.

For example, they’re suggesting you’d be looking at around 5 million people. Point I was making, they’re talking about jobs that pay $15 an hour. Basically, whatever wage you set for your government guarantee job, that’s going to be a floor in the economy. Anyone who makes less than that or maybe even makes more than that but has a very unpleasant job- they work in a meat packing factory or something like that. They’re going to be signing up for those jobs. So you can easily envision 10, 15, maybe even 20 million people, depending what sort of minimum wages we have in the economy, looking to be taking advantage of this jobs guarantee. That’s a really big deal.

Which brings up the second point. Are you prepared to supervise that? There are currently two million federal employees, give or take. Are you going to be able to supervise effectively? Five times as many? 10 times as many? I don’t mean to dismiss this. I think a jobs guarantee has a lot of merits but these are things that have to be thought through very carefully. And I don’t think that was done in their analysis.

GREGORY WILPERT: Well, I want to get back to the point later about the issue to what extent can a federal government deploy such a large program. But in your article you also suggest that progressives should be less concerned, or shouldn’t be so concerned about inflation. That is, in other words, that there should be more concern about lower interest rates.

DEAN BAKER: The point I was trying to make here is jobs guarantee, even if we think it’s a great idea, this is not something that’s going to happen this year, next year. Let’s say we get a progressive democrat elected in 2020 and they manage somehow to get a progressive congress. I’d love to see that but that’s a very, very optimistic scenario. When could you actually get some sort of jobs guarantee in place? 23, 24, 25? This is somewhere far off in the future, even in a very best case scenario.

The point I was making there is right now we have the Federal Reserve Board, an agency of the federal government, raising interest rates in order to keep people from getting jobs. You find it a little misplaced focus that we’re having this big debate on what is a job- Should we have a job guarantee, what it would look like. That’s fine, but let’s pay attention to what’s happening in front of our face. Federal Reserve Board is acting to try to keep people from having jobs. We should be paying attention to that.

And I was pointing out the democratic candidate in the last election, who actually is very close to the Center for American Progress. Hillary Clinton, of course. She actually said at one point that Presidents and presidential candidates shouldn’t even talk about the Federal Reserve Board.

And that, of course, was the position of Bob Rubin who was the Treasury Secretary under Bill Clinton and continues to have enormous influence in the democratic party. What I’d like to say is we should be focused on changing attitudes towards the Federal Reserve Board including places like the Center for American Progress. That’s a very immediate issue that can mean millions of jobs for people in the very near future. It’s fine. Have a debate on jobs guarantee. It’s a reasonable thing to discuss. But let’s not let the federal government eliminate jobs right in front of our face.

GREGORY WILPERT: I see. What about the issue then- Let’s say progressives manage to convince the places such as the Center for American Progress to be more concerned about what the Fed is doing. What about implementing a federal jobs program or jobs guarantee? You expressed concern earlier about the possibility of the federal government to actually implement such a large program. I’m wondering, was that an issue during the Works Progress Administration of the Roosevelt era? What are the concerns really about? Whether or not the federal government could implement such a large program? You mentioned the economic implications that happen in terms of siphoning jobs off of the private sector. Leaving that aside, what about the ability of the federal government to actually implement something like that?

DEAN BAKER: In terms of the 30s, I think Roosevelt had an enormous amount of leeway because he literally walked into a wrecked economy. So I think people were giving him leeway in the sense that sure, there were things that didn’t go right with the Works Progress Administration but by comparison with the Great Depression that was still great. I don’t think we can anticipate that any future presidents or let me put it this way. I hope that we don’t have such a horrible situation that future presidents could get that sort of leeway.

Now, in terms of implementing the program. If you talk about a large program like that, it has to be well managed. I’m not saying it’s impossible to have a large program like that and for it to be well managed, but you can’t just snap your fingers and say “Hey. We’re going to employ 10 million people or maybe even more” and be able to say that they’re mostly doing useful work. It’s fine. We know some waste. That’s inevitable. They’re mostly doing useful work. People are showing up when they’re suppose to. They’re doing work. They’re not just phoning in and getting a paycheck for it. I don’t think anyone would want to see that sort of waste. And needless to say, there will be enemies of the program. And if they can point to- here’s half a million people who didn’t do a day of work and they all got paid their $15 an hour just like all the people who are working. That’s going to be very hard to sell.

GREGORY WILPERT: The program that the Center for American Progress is proposing seems kind of drastic or radical in some ways. So many millions of people to be employed. What do you think is behind that? Why would they make such a proposal, on the one hand, that seems a radical proposal but on the other hand, not mention the role of the Federal Reserve?

DEAN BAKER: I could speculate on that. I’m always happy for the Center for American Progress to be on my left. I can’t speak to what their motives were. What I could say immediately is clearly there’s a sense that there’s a substantial segment of the democratic party or, more importantly, of the electorate, that’s to the left of where Hillary Clinton was in her presidential campaign. And I think it’s probably fair to say that CAP wants to appeal to those people. I think this is an effort to help people who were to the left of Hillary Clinton. That “Look. We’re paying attention to you. We could adopt some of your ideas.” In a lot of ways I think that’s good. But I would just hate to see that be at the cost of neglecting very important things in front of our face. Like the Federal Reserve Board raising interest rates to throw people out of work.

GREGORY WILPERT: Right. I’m wondering could it be also that some economists, for example, Paul Krugman has argued that maintaining low interest rates, even though he’s clearly in favor of it, but he says basically that doesn’t work for stimulating the economy because private enterprise has nothing good to invest in anymore. So in other words, we can’t guarantee it, can’t improve the employment rate. And therefore, we need more public spending. What do you make of that argument?

DEAN BAKER: I agree with the argument in the sense that it is far more effective to boost demand, boost employment by direct spending. And it would have been great if we could have had- We did have the President Obama stimulus in 2009, 2010. But it wasn’t large enough to begin with and it basically ended. We shifted to austerity in 2011. If you could get more spending, that would be a more effective way to create jobs. Whether that means a job guarantee, you could argue. There’s a lot of other things you can envision spending money on. The idea that fiscal policy, the government spending, is a more effective way to create jobs than low interest rates I agree with. Krugman’s right. I don’t think there’s a lot of difference between us on that issue.

The point I always make about low interest rates in a context where we’re not about to get the spending. Are we better off with low interest rates or high interest rates? To my mind, I don’t think there’s much to argue over. We would not be helping things by having higher interest