Saturday, October 24, 2009

A Rocky Road Ahead

We have a long way to go if we are going to create enough jobs to get us back to where we were before the four quarter of 2007. Since that time the economy has shed 7.2 million jobs.

The most recent forecasts (from the Washington State Revenue and Economic Forecast Council) would indicate that it would take us until the end of 2012 to replace those lost jobs (Using the most recent economic forecast by our state's Economic Forecast and Revenue Council for 2009-2011 and assuming 3% growth in 2012). Unfortunately, the labor force will continue to grow during this period - probably by nearly another 6 million jobs - thus unemployment could continue to be high.

The Wall Street Journal paints an even more dire picture. For them, assuming today's slow growth rates it will take us to 2016 to replace lost jobs - a very unlikely scenario. (perhaps poorly thought through).

There are two scenarios here. One is that the forecasts are wrong. That employment growth will be more similar to previous recoveries growing at 4 to 5% each year over the next couple of years. For example, using the 1982-85 employment growth rates, we would be very close to the pre-recession employment rate by the end of 2012.

If the forecast is right, we need to be aggressive about unemployment insurance policies, the safety net and job creation. As aggressive as we have ever been before.

Friday, October 23, 2009

Science and the American People

Ok. now I'll tell you what I'm really nervous about. Science and the American people.

A Pew Memorial Trust poll on climate change released yesterday indicated that the percentage of Americans who believe that the climate is warming has fallen dramatically in the past year. Now only 53% believe there is evidence of warming down from 75% a year ago. More importantly, less than 40% believe it is human caused.

This stacks up with other polls that indicate that only a third of of Americans indicated in a CBS News poll believe in natural selection. Pew points out that both of these numbers contrast with polling of scientists who all believe the climate is changing and 84% believe it is human caused.

97% of the scientists surveyed accept the theory of natural selection.

Science and the scientific method is what separates us from superstition and barbarism. This is a problem we need to think about.

Science and the scientific method is perhaps the most

The Political Economy of Recovery

As the 2010 elections near, Republicans are trying to argue that the stimulus was a failure and today's high unemployment is the proof. The fact of the matter is that the economy is starting to pick up but employment growth always lags overall economic growth. Jobs are the last thing to pick up as employers try to meet rising demand with what they've got. As I pointed out in my previous blog, the last big recession, 1980-82, had high unemployment for four years after it ended.

The current recession started mid-way through Bush's second term - in the fourth quarter of 2007 and may have ended in the third quarter of 2009. The recession started and was the longest lasting recession in decades when Bush left office.

The irony is that as the 2010 elections are looming, unemployment is likely to peak at 10.5% next summer and could still be at or above 10% around election time. This could be very bad indeed for Democrats throughout the country and it could be very bad for the entire country.

First of all, the party of the Presidency almost always loses seats in the off year election. In Washington State, the party of the president lost seats in 23 of the last 29 off year elections

Secondly, even if the economy is starting to grow, 10% unemployment will touch a third of the population and probably enough to tip key races in swing districts.

This is bad for the country because this recovery is likely to remain fragile for the next year or so. As Republicans blame the high unemployment on the failed stimulus and rail against big deficits, public support for renewal of stimulus spending is likely to wane. We could then find ourselves in the second V in W shaped economic recovery if the economy falters.

How can Democrats head this off? Obama has already started off in the right direction looking at extending unemployment benefits and the first home buyer tax credit as well as some lending incentives for small business. State legislators could look at unemployment benefits as well.

Democrats could also try and meet Republicans half way and look at some tax breaks that actually work. Senator Derek Kilmer proposed a job creation tax credit last session that gave small businesses a $3,000 tax credit for each new job they create. Washington state actually taxes the labor used in construction at nearly 10% a temporary tax credit could incentivize investments. Years ago, Congress enacted a Investment Tax Credit that allowed companies who invest within a short period of time a 20% tax credit. GAO research indicated that this was a tax break that actually stimulated investment.

Thursday, October 22, 2009

The Big W recovery

There actually was a worst recession since the great depression than the current one. That was the recession of 1980-82. This was a double dip recession where inflation-adjusted personal income in Washington state fell by 11% in the first quarter of 1980, recovered for a year and then dropped again by another 13.7% through the end 0f 1982. This is the famous W recession that some economists are now predicting for the U.S. The economy drops, recovers and drops again. A W recession could last for another year.

The recovery from the 1980-82 recession was a jobless one. Unemployment peaked at over 12% in the last quarter of 1982 and exceeded 20% in many rural timber counties. Unemployment didn't fall below 10% for over a year after the official end of the recession and remained above 8% for another three years.

Economists are expecting a similar scenario for the current recovery and many expect it to be worst. China appears to be the force that is actually lifting the world out of the downturn. India, the Far East and most of Europe are clearly on the upswing. We are lingering behind but exports to the rest of the world are likely to increase new business investments and expand exports. This should at least increase the number of hours each employee works and perhaps create new jobs as well.

But we may soon see a new wave of foreclosures, not related to sub-prime loans but from extended period of unemployment. Furthermore, the nature of unemployment has changed as well. The percentage of the unemployed who are considered by employers "permanently unemployed" is the highest in history. On top of that, the average length of unemployment is now 26.2 years - higher than than both the 75 and 80-82 recession. This combined with a lack of political will for a second stimulus package could be the second V in the W.

Monday, October 12, 2009

A new way of doing things

My mother lived for 34 years in Fond du Lac, Wisconsin. A few years ago, the Sisters of St. Agnes built a new college from scratch named Marion University in that town. What I remember the most about the college is that the President of the College didn't build the sidewalks until a semester after the school opened. He waited to see what paths the students actually took and then he paved them over.

We could learn a lot from his efforts in the world of social services. The confusing and complicated maze of "help" we provide to citizens in tough spots requires folks to go to at least four different locations to find the services that might help them out. Once they get there, the staff in those offices are only able to deal with the programs that they actually work for and can only refer them on to other forms of assistance. A women with kids whose husband ran out on her leaving her with nothing might take an hour to get to a state welfare office. But the person in the office might not be aware of the job services that might be available at a state job service center or the opportunities for scholarships and living expenses to go back to school at a state community college.

A lot of people give up and end up dependent on a form of assistance that just might not be right for them. And it's pretty damn expensive to serve someone at four different locations.

This problem is getting worse. More and more people are slipping into the safety net at the same time budget cuts are tearing it. We need to rethink how we do this.

Tomorrow morning at 10 a.m. at North Seattle Community College we are going to see a ground breaking on a building that will allow us to do things more efficiently and more effectively.

After several years of concerted effort by the agencies and the state legislature, work is about to begin on a new project to provide seamless services that will have all four agencies in the same building, working together with the single goal of getting people back to work.

We are going to ask the people who work for all those agencies to work together to figure out the pathways that the people they serve actually walk. What do people actually need? What would be most helpful?

The all-in-one location will streamline services related to employment services, basic skills education, career training, unemployment insurance, food stamps, child support, transportation services, welfare, health care and other state aid. Metro has even taken steps to re-route a bus to take people right where they need to go. There will be a Sound Transit station across the street. These are new and better paths.

Thursday, October 8, 2009

The Worthy an the Unworthy

My previous blog was about the "vulnerable" and the "newly vulnerable". To many Americans another way to describe this would be the worthy and the unworthy. The worthy are those hard working Americans who work hard, play by the rules but just lose their jobs or their homes through no fault of their owns. We out it to give them a hand up. The unworthy are those people who have ongoing economic struggles above and beyond the recent recession. They made bad decisions and are now paying the price. Giving them a hand out would merely make it worse.

I'm sure there are cases of people who are just lazy who are looking for a free lunch. But most of the people who receive social and job services in normal times are people who struggle with mental issues, suffer a form of disability or found themselves stranded by an abusive husband or bankrupted by health care costs or other unforeseen events. Recently attending a meeting on siting a homeless shelter near downtown, a cop told the audience that he would break this population down into thirds. A third are people who just had bad luck. Temporary economic problems that will likely get back on their feet again. A third were people with treated or untreated mental problems who just couldn't put it together. And a third were criminals or vagrants who didn't want to work.

I'm not sure that last third figure is fair but you get the idea. The problem is political. The bottom line is that in America the poor are not popular. Republicans have successfully demagogued against Democrats by linking them with the unworthy poor. Look at the recent health care debate. Republicans have picked up a lot of support by arguing that extending health care to the "poor" will result medicare benefits being cut, or middle class health care costing more. Listen to any of the town hall meetings and you will hear people get up and talk about "the poor choices those people made".

Republicans have capitalized on the "face of the poor" since George Wallace was so successful in winning over blue collar Democrats in the mid to late 60s (see the Emerging Republican Majority by Kevin Phillips). The poor simply don't look middle class. They are often darker, less likely to speak English, and in the case of the mentally ill they just don't look right. An easy target for sure.

Democrats from tough districts know that being seen as helping the poor or the vulnerable is political suicide. What's curious is that despite the negative ramifications, most Democrats persist. At a recent State Senate Democratic retreat, Sen. Darlene Fairley described her values as "making sure those at the bottom don't get screwed." That was clearly the most widely shared value at the retreat.

A lot of the political budget game in the legislature has been Republican efforts to expose Democratic investment in social services that would be better spent on tax cuts or k12 education spending. Perhaps the best example of this has been efforts by right wing Democrats and Republicans to require that 50% of the budget be required to be spent on education. These legislators knowing full well that this effort would result in a 20% cut from the rest of the budget - namely social services.

The Vulnerable and the Newly Vulnerable

One of the state's most respected public policy and anti-poverty advocates is Troy Hutson, the head of the state department of Social and Health Services Economic Services Division. Troy is from Guyana and is an attorney and an RN who created a a model education and jobs program with the Washington Hospital Association.

We are in a very tough situation right now where the state is making sharp and painful cuts in the safety net at the same time more and more people are falling out of the middle class and into the torn net. Troy pointed out that the inability to serve these "newly vulnerable" isn't the only problem.

Another problem is that the "existing vulnerable" populations of struggling families, mentally ill, disabled and other citizens are being displaced by a new wave of people previously ineligible for services - the "new vulnerable".

Community college classes targeted towards students struggling to move up the job ladder into higher wage jobs are now competing with better qualified students who have lost their jobs in more traditional industries. I'm told that 30% of the students entering the one year Licensed Practical Nurse Program already have Bachelor's degrees. Students trying to move up from 6 week Certified Nursing Assistant programs are being displaced by better qualified students.

New immigrants, the disabled, mentally ill and people who struggle with addiction or who are trying to recover from other misfortunes are now competing with better educated and savvier folks who recently lost their jobs.

I'm not suggesting that we caps these programs but we need to think this through. Clearly, one thing we need to do is rethink how we operate and fund our social net.