John Perilli: The Recovery Ain’t Over ‘Till It’s Over
Wednesday, January 08, 2014
I wonder if it isn't too much good news.
For we seem to have been lulled into the false idea that our economy has completely recovered from the great recession. Congress is considering whether or not to put a permanent end to programs like unemployment insurance, apparently forgetting that long-term unemployment is still a major problem in the United States. It's not the only one. Our median income is stagnant, and the stories of all the jobs we've restored have masked the fact that many people are overqualified for them.
The US economy is undeniably better off than it was five years ago. But whatever good news we hear, we must remember to keep a sober, analytical eye open. The recovery is not over yet.
The Rotten Deal
In December, a bipartisan deal went down that gave us our first federal budget in four years. As my fellow Mindsetter Rob Horowitz and I noted, it was not an easy compromise. One of the budget's most glaring omissions was its failure to extend federal unemployment insurance, a major sticking point for Democrats going into the final vote.
I didn't like the substance of the deal any more than the most committed partisans in Washington. But in this era of a do-nothing Congress with its hand on the self-destruct switch, stability is a precious commodity. Maybe now, with a two-year budget in place, we can all stop griping about uncertainty and start encouraging businesses to put down some long-term hiring strategies, so we can keep creating jobs.
Meanwhile, though, thousands of people who are still looking for jobs just got tossed to the curb. Of the 10.9 million total unemployed people in the United States––that is, people who are actively looking for jobs but can't find one––1.3 million have already lost their benefits, while another 1.9 million will lose them in the next six months unless the program is restored.
Rhode Island's own Sen. Jack Reed has partnered with Nevada Republican Sen. Dean Heller to introduce an emergency three-month extension of unemployment benefits into the Senate. As if on cue, Republican dissenters in the House and the Senate marshaled to stop them. Their excuses are varied. There's "no appetite" for the benefits anymore. We ought to let the private sector take our recovery the rest of the way.
Now, this reveals two attitudes on the part of Republicans. One is just garden variety never-spend-money-on-anything intransigence. The other attitude is much more insidious: We've recovered enough. It's time to dismantle our social safety net, which helped us out of the recession in the first place, and let the private market take control. I say this is so dangerous because it is flat out wrong.
Not Just Yet…
Let's get this straight: Unemployment benefits are not a handout. You have to be able to prove you're looking for a job to qualify, and you can't just take them forever. For the long-term unemployed, the benefits can be an important lifeline, especially if they have little private savings to live on.
In theory, if the economy were booming and jobs were plentiful, could we trim these benefits with few ill effects? Maybe.
This goes back to the ideas of British economist John Maynard Keynes. If you know about him, you either love him or hate him. If you don't, here are the basics: Keynes believed the government should spend money to get out of recessions, but should ease off on spending during boom times.
I'm a devoted Keynesian. But do I think that we've reached the point where the government can start easing off the recovery pedal? Absolutely not.
It is hard to imagine the singular lousiness being unemployed long-term, defined officially by the Bureau of Labor Statistics as being out of a job longer than 27 weeks. Consider this: If you have been out of work for half a year, you have just a twelve percent chance of finding a new job in a given month. Even if you do get a job, your income is likely to fall by forty percent. That's in addition to all the negative health effects of long-term unemployment, including stress and higher rates of suicide.
4.1 million people in the United States, and perhaps many more who have just quit looking for jobs altogether, are living like this right now. Our recovery continues apace, but clearly our work is not done. There is no reason to abandon unemployment benefits right now, nor anytime soon.
The Critical Moment?
All of this obviously prompts the question: When will our recovery be complete? It's inevitably going to be an arbitrary endpoint, at a certain percentage of unemployment or a certain period of economic growth.
But let's look back at our recent boom times, in the late 1990s and mid-2000s. Unemployment was down around four percent, and jobs were, if not plentiful, at least readily available. We must get at least that far before we even consider reducing the time of eligibility for unemployment benefits. And even then, we cannot just cut state and federal benefits altogether. There will always be some cyclical unemployment. Jobless folks will still need unemployment money to buy them time to get back into a good-fitting job, not just a part-time position they're overqualified for.
Unfortunately, America was forced to accept a lousy budget deal which didn't extend jobless benefits. But this is no reason to hang up the stimulus spikes and call our recovery done.
There may come a time when we don't need unemployment programs anymore, when all the vicious effects of long term joblessness simply work themselves out in the private market. But that time is not now.