A New Deal for child care

If there aren't enough "shovel-ready projects" for workers, how about a mass mobilization for early education?

Published November 16, 2009 10:01PM (EST)

While the financial press and the econoblogosphere obsess about the bleak labor statistics in the U.S. or argue about whether the Obama stimulus has actually saved any jobs, over at Slate, where staffers apparently are required to come up with three contrarian takes on the day's news before their first cup of coffee, Daniel Gross writes "Coming Soon: Jobs! Why employment will rebound sooner than you think."

After pointing out that the economy is shedding jobs at a slower and slower rate and that first time claims for unemployment benefits are falling, he focuses on the the astonishing 9.5 percent productivity growth registered in the third quarter -- which translates as fewer workers working harder -- and theorizes that such a trend cannot be sustained.

If you look at economies over many centuries, you can't grow productivity for 7 or 9 percent for more than two or three quarters," said Lakshman Achuthan, managing director at New York-based Economic Cycle Research Institute, whose leading employment indicators are looking up. "At a certain point, people will start to collapse at work." Should the economy expand in the fourth quarter at the same 3.5 percent annual rate it did in the third quarter -- as it shows every sign of doing -- companies won't have any choice but to hire, says Michael Darda, chief economist at MKM Partners. "There's an outside chance we could see job growth by the end of the year."

Seems like a slender thread on which to hang one's optimism, and sure enough, Nouriel "Dr. Doom" Roubini presents a rather forcefully stated dissenting view in "The Worst is Yet to Come: Unemployed Americans Should Hunker Down for More Job Losses."

The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.... So we can expect that job losses will continue until the end of 2010 at the earliest....

The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.... Based on my best judgment, it is most likely that the unemployment rate will peak close to 11 percent and will remain at a very high level for two years or more.

At first glance, Roubini's pessimism would seem more grounded than Gross' optimism, with one caveat -- productivity growth did not grow as fast in either of the last two recessions as it is now, nor did we witness the same kind of V-shaped GDP plummet and then rebound in 1991-2 or 2001-03 that we are seeing now.

So maybe this time is different. But probably not -- which leads to the critical question: What should we be doing now? Roubini argues that "There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers."

A temporary tax credit is in the works, by all indications. Help for state governments was axed by moderates in the Senate during the first stimulus go-round, and it's hard to see them loosening up as the deficit hawk clamor grows ever louder. As for labor-intensive, shovel-ready infrastructure projects -- I expect the administration's response to that request would be "show me the opportunities." It takes time to get big infrastructural projects underway -- more time than ever before, most likely, given various current regulatory and bureaucratic hurdles. The most obvious problem facing the Obama administration, if it wanted to start putting people on the public payroll directly, is what should the people be hired to do?

A good wrap-up in the Washington Post by Alec MacGillis cites Jared Bernstein, a White House economic adviser, as arguing "that there weren't enough public works projects ready to be launched." But MacGillis also mentions a proposal by the Economic Policy Institute (which, ironically, is the think-tank at which Bernstein previously resided") for "giving money to states and cities to hire people to paint schools, board up vacant homes, staff child-care centers and reopen library branches."

Changing diapers might not sound as dramatic as building bridges or new highways -- but not every paying job requires a shovel. A New Deal for child care might not be glamorous, but both the out-of-work and the working parents would stand to benefit tremendously

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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