The administration’s biggest economic mistake so far was to badly underestimate last January how bad the employment situation would become by fall. As a result, it low-balled the stimulus — settling for a plan that, while avoiding even worse job losses, didn’t go nearly far enough.
Obama has to return to Congress, seeking a larger stimulus.
Yes, I know. We’re already in the gravitational pull of the midterm elections (look at the bizarre attention given to gubernatorial elections in New Jersey and Virginia, and even to a congressional election in the 23rd district of New York, as supposed harbingers of voter behavior a year from now!) so it will be even harder to round up the needed votes from Blue Dog Dems fretting over the deficit. And you can forget the Republicans.
And yes, I know: Only about half the current stimulus has been spent, so it will be awkward to make the case that we need a larger one.
But here’s the problem. Everything else on the table — a new jobs tax credit, more loans to small businesses, more help to troubled homeowners, another extension of unemployment insurance, another round of subsidies to first-time home buyers — are small potatoes relative to the importance and likely effect of a larger stimulus. Some of these initiatives may do some good, but even combined they’ll barely make a dent in the growing numbers of jobless Americans.
Meanwhile, the states are slicing their budgets, laying off workers and ratcheting up taxes. That’s because state tax revenues are falling off a cliff, and almost every state is barred by its constitution from running a deficit. That means the states are actively implementing an anti-stimulus plan.
Let’s be clear about this. The national rate of unemployment will almost surely hit 10 percent; we’ll know Friday whether it already has. This is more a psychological and political threshold than an economic one (it doesn’t include everyone who’s too discouraged to look for work, or working part time who’d rather be working full time, or working fewer hours in an ostensible full-time job, or otherwise fully employed but being paid less; the Bureau of Labor Statistics’ payroll survey, also due Friday, provides a more accurate picture). But it nonetheless represents a degree of hardship this country hasn’t seen in decades.
Public approval of Obama’s handling of the economy has slipped to 46 percent in an Oct. 30-Nov. 1 CNN poll, from 59 percent in March. Remember, Obama was elected in part because the public didn’t have confidence in McCain’s ability to manage the economy. In exit polls last November, almost two-thirds of voters listed the economy as the nation’s top issue. If the job numbers don’t start moving in the right direction, not only will Obama’s poll ratings continue to drop but congressional Dems will all be in trouble.
That should be Obama’s selling point to the Blue Dogs. He should tell them the economy needs a bigger stimulus in order to show improved job numbers by the mid-term elections. And he should make sure they understand that they’re more politically endangered next November if the the job numbers aren’t moving in the right direction by then than if they vote for a larger stimulus now.
A few days after the New York Times’ (embarrassinglybelated and deeply flawed) article on Apple’s Chinese production facilities reignited a national discussion about offshore outsourcing, President Obama was confronted during a Google+ “hang out” about why during a brutal unemployment crisis his administration continues to support expanding the H-1B visa program that allows tech companies to annually import thousands of low-wage engineers from abroad. In his stunning answer, the president first expresses bewilderment that any American high-tech engineer could be out of work, because he says that “what industry tells me is that they don’t have enough (domestic) highly skilled engineers” and that “the word that we’re getting is that somebody (a domestic engineer) in a high-tech field should be able to find something right away.” He then goes on to insist that the H-1B program is “reserved only for those companies who say they cannot find somebody in (a) particular field” and that it shouldn’t apply to industries where “there are a lot of highly skilled American workers” looking for a job because he says his administration is focused on “encourag(ing) more American engineers to be placed” in open positions.
For a single news cycle, the interchange made headlines focused on the president’s subsequent request that the questioner send her husband’s resume to the White House. But as heartwarming as that human interest angle was, it buried the real news in the interchange: namely, that Obama showed himself to be either wholly ignorant of the reality facing high-tech workers today, or simply willing to echo the self-serving lies of his high-tech CEO friends. Whichever it is, the president’s claims are clearly at odds with the basic facts of the high-tech labor market.
Though the unemployment rate for the high-tech industry is certainly lower than the overall unemployment rate, the sector is far from the full-employment status that tech CEOs claim. No matter what the industry is “telling” Obama, there remain thousands of highly skilled engineers in America who are either underemployed thanks to tech companies use of the controversial “permatemp” status, or completely out of work. That’s because, as I noted last week, despite the political rhetoric to the contrary, our universities are producing far more Science, Technology, Engineering and Math (STEM) workers than allegedly worker-starved tech companies are willing to employ. Indeed, a generation of jobless engineers exists not because, as tech CEOs insist, they don’t possess the skills to fill open jobs, but because those tech CEOs aren’t looking for domestic workers. On the contrary, they are looking for foreign workers who will simply accept lower wages and fewer workplace rights than Americans.
That brings us to the president’s comments about the H-1B program — an instrument so antithetical to the interests of American workers that India’s Commerce Minister officially christened if the “outsourcing visa” in 2007. As Rochester Institute of Technology professor Ron Hira has expertly documented in congressional testimony and detailed reports, this visa both allows American high-tech companies to replace their domestic workers with cheaper foreign workers, and also allows foreign outsourcing firms to move huge swaths of America’s existing high-tech industry offshore for the long haul.
In the first scenario, which I reported extensively on in my 2008 book “The Uprising,” a high-tech company will simply terminate an existing American worker — typically, a more senior worker whose longtime service at the company has resulted in higher wages. Then, the company will use an H-1B visa to import a foreign replacement for that worker — one who accepts far lower wages and benefits, both because the wages in their home country are lower that what they are being offered on the H-1B temporary visa, and because their H-1B visa status is wholly controlled by the employer. That means that most foreign H-1B workers wouldn’t dare ask for the same wages as their American counterparts because it would mean asking for equality from an employer who has the unilateral power to deport them.
The effects of this particular use of the H-1B visa are not surprising. As the Government Accountability Office noted, many high-tech “employers said that they hired H-1B workers in part because these workers would often accept lower salaries than similarly qualified U.S. workers.” That is borne out by wage statistics from the U.S. Citizenship and Immigration Services agency, which the New York Times reports found that “the median salary for new H-1B holders in the information technology industry is actually about $50,000″ as compared to much higher wages for similarly skilled domestic workers. And in case you believe President Obama’s mind-boggling assertion that H-1B visas are “reserved only for those companies who say they cannot find somebody in (a) particular field,” remember that his own Department of Labor admits the opposite is true: The visa may be used and “H-1B workers may be hired even when a qualified U.S. worker wants the job, and a U.S. worker can be displaced from the job in favor of the foreign worker.”
As Hira reported in a study for the Economic Policy Institute, this straightforward use of the H-1B visa has easy to understand effects at some of America’s biggest tech firms:
In early 2009, Microsoft announced it would lay off 5,000 workers. After meeting that target by late 2009 it announced another round of 800 layoffs. Yet it continued to import H-1B workers, ranking fifth in FY08 and moving up to second in FY09 on the top H-1B employers list. It received 2,355 H-1Bs in those two years alone. Microsoft also extensively contracts with leading offshore outsourcing firms like Infosys and Satyam, which provide on-site personnel on guest worker visas. In addition, it recently signed a major three-year contract with Infosys to “handle all the technology services and support for Microsoft itself.” Given Infosys’ statements in its SEC filings, the vast majority of the workers servicing the Microsoft contract will almost surely be guest workers on H-1B and L-1 visas…
Hewlett-Packard announced layoffs of nearly 25,000 employees after its acquisition of EDS in 2008, yet H-P and EDS, and its offshore outsourcing subsidiary MPhasis, received 1,047 H-1Bs and L-1s in 2008 and 2009. Not all of those 25,000 jobs would be lost — approximately half of them were going to be offshored to workers in low-cost countries.
Of course, one of the most compelling arguments forwarded by proponents of the current H-1B program is that even though existing American employees are being put out of work by H-1B visa holders, at least these new arrivals to the United States might stay here, thus permanently adding their valuable high-tech skills to the overall American workforce. While that may be true for some of the H-1Bs who work directly for American firms, note the section in the above passage about foreign companies such as Infosys and Satyam, because it highlights that second, even more insidious way the H-1B program today operates — specifically, the way it works with non-American “consulting” firms.
Recall that such consulting firms whole business is helping American high-tech firms permanently move various IT services and operations overseas — not because workers in those countries are better skilled or educated, but because they will accept far lower wages and workplace standards. In this, we’re not talking about Microsoft or HP hiring a few lower-wage fill-ins — we’re talking about Microsoft or HP hiring an entire foreign firm like Infosys or Satyam to help them subcontract huge parts of their existing American business to foreign locales where wages are way lower, workplace regulations are lax, and unions do not exist. Once such contracts are in hand, these foreign subcontractors acquire thousands of H-1B visas from the U.S. government and dole them out to their own employees working on a contract basis inside major American high-tech firms inside the United States. Those employees are charged with helping those American firms permanently shift so-called “back office” services to low-wage locales like India. As the New York Times explained:
(Indian outsourcing consutancy firms) have used (the H-1B visa) to further their primary mission, which is to gain the expertise necessary to take on critical tasks performed by Western companies, and perform them in India at a fraction of the cost. Thousands of H-1B visas every year are being won by individuals acting as outsourcing ambassadors. Highly skilled and easily meeting the objective standards for excellence that the law requires, the employees interact with U.S. companies like Morgan Stanley and Boeing, gathering an outsourcing mandate and lubricating the flow of tasks to an Indian back office…
According to data compiled by ComputerWorld, this manipulation of the H-1B program is now one of the biggest ways the visa is used. As the trade magazine reported just three days before President Obama’s public defense of the H-1B program, foreign “offshore outsourcing companies” — read: companies that subcontract huge swaths of domestic work to low-wage locales offshore — now “make up the majority of the top 10 H-1B visa users in 2011.” This is why in a separate story, the Times went on to report that relatively few H-1B employees from offshore outsourcing firms seek permanent green cards. Far from the H-1B being used in the way its proponents assert — as a method of attracting new, high-skilled workers to become permanent residents and thus improving America’s overall high-tech workforce — the H-1B is now being used as a means of shipping America’s entire high-tech industry offshore.
To be sure, it’s impossible to know if President Obama is simply ignorant of these facts, or merely doesn’t want to acknowledge them, for fear of alienating his campaign donors in the high-tech industry. But don’t discount the power of those donors to turn an incumbent president into their own public advocate — especially during an election season when that incumbent president has a well-known history of relying on high-tech donors to underwrite his election campaigns. Obviously, those donors have a vested financial interest in answering Obama’s fundraising call if — and when — that president seems determined to preserve the status quo and oppose any proposed pro-worker reforms of a program like the H-1B visa. After all, no matter if they are replacing domestic American workers with imported H-1B workers, or using the H-1B program to shift huge parts of their businesses offshore, those high-tech executives have a very lucrative scam going, and clearly, they don’t care if American workers are the ultimate victims.
Whether the president cares remains an open question — but based on his comments about the H-1B program last week, his ultimate answer doesn’t look promising.
David Sirota is a best-selling author of the new book "Back to Our Future: How the 1980s Explain the World We Live In Now." He hosts the morning show on AM760 in Colorado. E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. More David Sirota
Proof, once again, that it’s hard to predict what’s going on in the U.S. labor market: The consensus opinion of analysts had the U.S. economy adding 120,000-150,000 jobs in January. The ADP private sector jobs report, released on Wednesday, counted 170,000 new jobs. But the obsessively watched U.S. government report, released Friday morning, reported a surprising — and encouraging — 243,000 new jobs. The unemployment rate fell another couple of notches, to 8.3 percent. Can you say bull market?
In the context of the last few years, that’s what we call a strong labor report. The job gains were widely distributed. Manufacturing added 50,000 jobs. Healthcare grew by 31000. Leisure and hospitality, 44,000. And so on. Most encouraging of all, the labor force participation rate held even at 63.7 percent and the employment-population ratio rose, clear signs that Americans are no longer simply abandoning hope and giving up any chance of finding a job.
Republican leaders are already complaining that the unemployment rate is still too high and reminding everyone that the economy has been awful for most of Obama’s term in office. That’s true, but the political implications of the new numbers are still huge. If we are to believe Nate Silver, the political number-cruncher now ensconced at the New York Times, President Obama needs jobs growth of 150,000 a month between now and November to have any chance of holding on to his job. Anything better than that obviously improves his odds. The timing could not be better for the White House.
There are still big problems to deal with. The Bureau of Labor Statistics counted 11.8 million unemployed Americans, and 42.9 percent of them are considered “long-term unemployed” — jobless for 27 weeks or more. That’s 5.5 million people whose job prospects get worse every month.
But U.S. economic growth is clearly accelerating. The auto industry had a great January. The manufacturing and retail sales sectors both reported healthy numbers in January. It’s getting more and more reasonable to argue that the labor market is finally gaining real steam. All the pieces are falling into place for a virtuous cycle — more jobs translating into more demand, which equals even more jobs.
This story is part of our new series on long-term unemployment in America, which aims to keep jobs a primary topic during this presidential election year. To watch part one of our new video series, "F**ked: The United States of Unemployment," click here.
The unemployment rate is gradually trending down. That’s the good news. The bad news is that by any civilized standard, the current state of the labor market in the United States is an ongoing atrocity.
As of December 2011, there were 13.1 million unemployed workers in the United States, an increase of more than 5 million since the Great Recession officially began in December 2007. Even worse, 5.6 million of those workers (42.5 percent) fall under the category of “long-term unemployed” — they’ve been jobless for 27 weeks or more. Since the end of World War II, we’ve never seen anything close to such a disaster; the previous high, in the aftermath of the 1981 recession, was only 25 percent.
No matter what your political persuasion, those numbers hurt. The distressing plight of the long-term unemployed has been well-documented. The longer you are out of a job, the less likely you are to find new employment. And if you do find a new job, it will probably pay less and offer worse benefits. Extended unemployment is bad for marriages, physical and mental health, and plain old self-respect.
With all that in mind, we face an astonishing political reality: The Republican presidential nomination battle has moved into Florida, a state still suffering the pain of an unemployment rate over 10 percent, and we’re hearing more from Newt Gingrich and Mitt Romney about each other’s personal failings than we are about what they are going to do to fight the scourge of unemployment.
Oh sure, there’s no end of talk about how President Obama’s policies are responsible for everything that is wrong with the American economy. We’re also hearing a lot about the (bogus) theory that extending unemployment insurance benefits makes Americans too fat and lazy to get off the couch and look for a job. And there’s the occasional rhetorical gesture: At the end of his concession speech in South Carolina, Mitt Romney pledged that “I will get America back to work, and I’ll make sure that we remain the shining city on the hill.”
It’s certainly possible that the necessity for mano-a-mano combat between Romney and Gingrich has forced the two candidates to shelve their critique of Obama’s handling of the economy for the time being while they busy themselves going for each other’s throat. But there’s another reason why we aren’t hearing much about the unemployment crisis on the campaign trail: None of the Republican presidential candidates have anything new to say on the topic that we haven’t already heard from the GOP, ad infinitum, ad nauseam, for the last 30 years. Their proposed strategy hasn’t changed an iota since Ronald Reagan ran for president: It’s still all about cutting taxes and slashing regulations.
And there’s a big problem with that. Because whether or not you believe that the current unemployment problem is cyclical — that is, part of the normal ups and down of the business cycle — or structural — a more or less permanent response to a profoundly changing economy — the Republican platform is toothless. On the one hand, it’s hard to combat a cyclical problem with the same policy proposals that one puts in place in good times or bad, and on the other, it’s arguable that the structural problems in the U.S. economy are, at least in part, a consequence of decades of low taxes and deregulatory philosophy.
A tour of the GOP candidates’ websites is revealing. Ron Paul’s website doesn’t even mention either “jobs” or “unemployment” under the category of “issues.” The closest he gets is advocating the passage of more anti-union “right to work” laws. Rick Santorum’s Where I Stand page tells us that he believes in American “Exceptionalism,” is a “Champion of Faith and Families” and makes clear that he really, really opposes gay marriage; but it has no section devoted to either jobs or unemployment. Newt Gingrich does manage to include a page on “Jobs and the Economy” but somehow can’t bring himself to utter the word “unemployment.”
To his credit, Mitt Romney is the only Republican candidate whose website includes a comprehensive (87-page!) plan announcing his economic agenda. If you’re looking for a full-throated lambasting of Obama’s management of the economy, along with complaints about high unemployment, that’s where you’ll find it, a fact that, at first glance, would seem to make Romney a little more suited for electoral success than his current poll numbers would indicate.
But a closer look at Romney’s plan — or Gingrich’s, for that matter — reveals why neither he nor his fellow GOP pretenders to the White House throne are making a bigger deal of the plight of the jobless. They just don’t have anything fresh to say.
Romney’s prescription for an economy that isn’t producing enough jobs is to reduce taxes on savings and investment, eliminate the “death” tax, and cut corporate taxes. As for regulatory policy, for starters, he promises to repeal “Obamacare” and Dodd-Frank, as well as “review and eliminate” all other Obama-era regulations. But this agenda doesn’t separate him from his fellow GOP presidential candidates. He just spells out the party line in greater detail. If anything, Gingrich and Paul are further to the right — advocating even more extreme tax cuts and greater swaths of regulatory slash-and-burning.
So what does this mean for unemployment?
For the last few years, economists — left, right and middle — have been arguing heatedly about the nature of the current crisis. As noted above, there are two main competing theories — the spike in unemployment is either cyclical or structural.
Cyclical unemployment presumes that the key problem in the economy is a lack of demand. With no consumer appetite for goods or services, companies have to lay off workers. Consequently, there are more people looking for jobs than jobs available.
Structural employment speaks to a mismatch between the jobs that are available and the skills of workers who need jobs. If manufacturing moves to China, then the U.S. suddenly has a great many manufacturing workers who are ill-suited to fill the openings in the booming healthcare sector.
There are different policy options available depending upon what you think the nature of the employment crisis is. If the problem is cyclical, the answer, at least from a Keynesian liberal point of view, is stimulus. Government spending works to counteract the downturn in the business cycle, either by creating jobs directly (infrastructure spending, assistance to state and local governments) or by putting money in people’s pocket — food stamps, unemployment benefits, et cetera. More money creates more demand, resulting in more jobs.
If the problem is structural, the challenge is bigger. Government needs to aggressively retrain workers, or engage in industrial policy that targets strategic sectors, or tinker with trade policy.
Some liberal economists, led by Paul Krugman, are convinced that our current crisis is mostly cyclical. They point to the fact that nearly every job sector suffered huge losses in the recession (if the problem was structural, you’d see an uneven distribution of job losses) and to the huge mismatch between the number of job openings and the number of workers seeking jobs.
But it doesn’t have to be either/or. We could be working our way through the worst of both worlds — a situation in which a massive cyclical downturn exacerbates the negative effects of structural changes decades in the making. We know that the dual forces of globalization and technological progress have treated the American middle class harshly. If a machine or a Chinese laborer can do the job — it’s gone.
In an insightful piece in the National Journal last November, Michael Hirsh made a provocative case that there has been a steady rise in long-term unemployment over the last 30 years that transcends the recession-recovery cycle. He argues that we attribute this in part to the supremacy of free-market policies that have exacerbated income inequality, weakened the safety net, and ended up making American workers more vulnerable in a competitive world.
If that’s true, where does that leave the Republican candidates? We already know that they’re completely averse to counter-cyclical government spending, and indeed, their opposition to any kind of tax increases has effectively crippled the federal government’s ability to act in a robust, fiscally prudent manner when the economy hits a downturn. But if the problem is structural, then their low tax, deregulatory agenda just continues us down the same path we’re already on. It leaves us even more defenseless against a changing world. We’re already enjoying historically low levels of taxation. We’ve already loosened up the rules restricting Wall Street’s freedom. And look where that’s got us!
The vast majority of the job losses contributing to today’s high unemployment came before a single Obama policy took effect. The architects of the world that delivered us the Great Recession believed exactly what the current crop of Republican presidential candidates are advocating. If I was them, I’d be keeping my lips zipped too.
——
Salon exclusive: “F**KED: The United States of Unemployment,” a series by filmmaker Immy Humes
Before “We are the 99 percent” emerged as a rally cry from Zuccotti Park to the Port of Oakland, another group identified with this number — but for a very different reason. A handful of New Yorkers whose 99 weeks of unemployment benefits had expired were frustrated that political leaders seemed resigned to a future of austerity instead of figuring out how to put Americans back to work. These “99ers” realized that if they wanted to change things, they would need to get organized and fight back.
In “F**ked: The United States of Unemployment” — a new Salon series that will chronicle this important yet largely untold story — Academy Award-nominated director Immy Humes traces the birth and evolution of the 99ers movement. Over the course of the series, Humes will explore her personal struggle with long-term unemployment, the struggles of her fellow 99ers, and confront the stigma of what it’s like to be jobless in America today.
Salon is committed to telling the story of the unemployed as part of the American Spring. At noon Tuesday (ET), we’ll publish Andrew Leonard’s story on the state of the unemployed, and ask why the jobless problem is not a more resonant political issue during this election year.
And we want to hear your stories. The Great Recession has left millions unemployed and desperately seeking work — and yet Republican candidates still recycle the same tired lines about poor work habits and food stamps. Tell us what it’s really like to be out of work in this economy on Open Salon. We’ll cross-post some of your stories here on Salon.
The argument is simple. For most of the last year, labor market analysts have been glumly pointing out that a significant portion of the steady drop in the unemployment rate is illusory. Discouraged by the lack of job opportunities, workers have been giving up entirely. They’ve stopped looking for jobs altogether, and as a consequence, the overall labor force has been shrinking. A shrinking labor force combined with some measure of job growth equals falling unemployment, but not necessarily a robust economy.
However, the economy has indeed been improving, and judging by the December labor report numbers, the labor force has mostly stopped shrinking. That raises a clear possibility that people who have previously given up looking for jobs might be encouraged to start knocking on doors and submitting resumes. Which means, paradoxically, that the unemployment rate might actually start to rise as the overall economy grows faster, and the labor force expands.
And that, says Reich, “will be bad for the president because it will look as though the trend is in the wrong direction again.”
Now, I have no doubt that GOP-leaning pundits and Republican presidential candidates will be quick to portray any uptick in the unemployment rate, no matter how fast the overall economy is growing, as evidence of gross White House incompetence. But I’m not sure Reich has thought this one through.
We have reasonably good evidence that voters make decisions based on their perception of how the economy is doing. But is that perception based on news headlines that say the unemployment rate jumped from 8.5 to 8.7 percent, or is it based on how they actually feel about the state of the economy in their own life? I’m betting that the latter explanation is more likely. Think about it: If people are rejoining the labor force and looking for jobs, that’s because they think that there are finally some jobs to be had. That means that they are feeling positive about the economy. And that can only be good news for Obama.
We can also throw into the mix the likely possibility that any unemployment uptick that can be reasonably attributed to faster economic growth is going to be seen as a positive sign by investors who have a financial interest in paying attention to what is really happening. So far, markets have already begun 2012 in a reasonably happy mood. If economic growth accelerates, stock investors will continue to be bullish, even if the unemployment rate rises. Swelling retirement accounts and college funds will further mitigate against the supposed downside of good economic news.
You want to know what could hurt Obama? Bad economic news. Reports of mass layoffs. A crashing stock market. A big hike in gas prices. Runaway inflation. Those are the kind of things that will move perceptions in a negative direction. But an uptick in the unemployment rate because workers are feeling optimistic? I don’t think that possibility is causing any sleepless nights in the White House.
PhD 
Alice Peurala: A Woman of Steel 
Killing Me Softly (With This Economy) 
A passport to utopia 
“The Fault in Our Stars” and “There Is No Dog”: Not kids’ stuff 
Ricky Gervais: My conscience never takes a day off 
Lessons of a very sexy pirate costume 
America’s failed promise of equal opportunity 
Is gay literature over? 
A voice that touched us all 
Whitney Houston dies at 48 
Didn’t she almost have it all? 
Porn’s taboo transsexual stars 
