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AFL-CIO Calls for $500 Billion in New Jobs Spending, Strengthened Safety Net, More Aid to States

We’re at a really tense time in America. The economy is improving mildly but job losses continue to mount. The stimulus package seems to have improved things and saved the country from disaster, but it wasn’t big enough, and its impact is basically peaking right now in terms of how much money is going out. This has raised real fears of a “double-dip recession”:

First, a large part of the growth we’ve had has been driven by the stimulus — but the stimulus has already had its maximum impact on the growth of GDP, will hit its maximum impact on the level of GDP in the middle of next year, and then will begin to fade out. Second, the rise in manufacturing production is to a large extent an inventory bounce — and this, too, will fade out in the quarters ahead.

I’d be more sanguine about all of this if there were any indications that private, final demand is taking off — consumers, business investment, whatever. But I haven’t seen anything suggesting that sort of thing.

Tomorrow, the White House is hosting a “jobs summit,” and some indications are they will look to the private sector to see what they are going to do. Well, with private demand still on the sidelines, there is simply no choice but to add public funding into the mix to create jobs.

Today, the AFL-CIO and other groups held a conference call to discuss a number of job creation strategies, all of which need to be considered to “flood the zone” with a number of projects. The respected economist James Galbraith, who described the budget deficit as the “lifeblood of the economy” at this point (much like he said in a recent conference), the only thing keeping the nation from utter ruin, said that the government cannot do “too much.” In fact, holding back in the initial stimulus package has complicated efforts to go back for more.

The AFL-CIO’s package, described here as a mix of social safety net strengthening, direct employment measures, aid to the states, infrastructure spending, and increased lending to small businesses (something Mark Warner has done a lot of work on) would cost between 400-500 billion dollars, and would create 4 million new jobs. Thea Lee, the labor federation’s deputy chief of staff, said they were supportive of the Economic Policy Institute’s idea to pay for the measure in the out years with a financial transactions tax that starts three years after the inception of the jobs bill. This allows for more public demand immediately while paying for it down the road, after recovery kicks in.

Keith Ellison, the Minnesota progressive Congressman, described the current state of affairs as “The Great Recession” and that workers are being decapitated by rising unemployment and job insecurity. He believed that selling a big new jobs package wouldn’t be easy, but if people understood that they would get something tangible for the spending, they would be receptive. Scaling back public efforts before recovery takes hold would be akin to the “Roosevelt Recession” of 1937-1938, Ellison said, when the fiscal hawks forced cutbacks in spending to balance budgets, and the economy went south again.

Leaders of the effort set a goal of getting something out of the House of Representatives before they left Washington for the end of the year recess on December 18. The Senate is a different matter, though Kent Conrad, as much a budget hawk as anyone, said he thought there was support in the Senate for infrastructure spending and aid to the states, two planks of the five in the AFL-CIO plan. He also cited a job creation tax credit for businesses, which some progressive groups support. The AFL-CIO’s Lee said that it wouldn’t be the best use of scarce dollars.

Whatever the outcome, there needs to be a real sense of urgency in Washington to avoid a second recession and restructure the economy with a stronger foundation for the future. I don’t know if that urgency exists at this point.

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David Dayen

David Dayen