We Must Put America Back to Work

America is, today, in an economic crisis far worse than most of us realize. People are anxiously waiting for hard times to end and prosperity to return again, just as they wait for winter to end and spring to begin. But it doesn’t work that way. The seasons of the year are a fairly predictable natural phenomenon. The business cycle is not. The economy is manmade, and the business cycle is highly dependent on the behavior of individuals, business units, and government. At the beginning of 2010, the unemployment rate was 10.0 percent with 15.3 million American workers officially classified as unemployed. Since the recession started two years ago, more than 7 million workers have lost their jobs, and most economists do not see a speedy recovery in the foreseeable future. Instead, they see a lengthy period of high unemployment.

The costs of prolonged high unemployment can be enormous, both in terms of the personal suffering of unemployed individuals and their families, and in terms of lost production for the nation. The human suffering from long-term unemployment is just as real as the suffering that results from a natural disaster such as Hurricane Katrina. But the victims of high unemployment, spread all over the nation, are not nearly as conspicuous as the victims of Katrina. There is no way for the media to bring the plight of the unemployed into our living rooms in the same way that they portrayed the suffering that resulted from Katrina. But prolonged unemployment can contribute to homelessness, hunger, mental depression and even an increased rate of suicides. In economic terms, historians have estimated that the dollar cost of the Great Depression of the 1930s was greater than the cost of World War II. They estimate that the dollar value of the lost production during the 1930s would have been a large enough sum to cover the cost of a new house, and several new cars, for each and every American family during the decade.

The Great Depression was essentially a series of recessions. Before the economy fully recovered from each recession, it would plunge into a new recession. This pattern continued for a full decade. Could we be in for another decade of economic stagnation? We could, if we just sit back and wait for the economy to heal itself. During the first two years of the Great Depression, President Hoover vetoed every piece of legislation enacted by the Congress to speed up economic recovery. Hoover argued that if we would just leave the free market system alone, it would restore balance and bring about economic recovery without any meddling by government. But he was wrong.

Our economy has been severely damaged by the events of the past 18 months, and we must take strong actions to get the economy back on track. Consumer demand, which has been the engine for most economic recoveries in the past, is likely to remain weak indefinitely, and business investment is usually derived from consumer demand. The weak consumer and investment demand must be offset by increased government demand, if the economy is to experience a speedy recovery. There is nothing more wasteful than allowing able-bodied men and women, who want to work, to remain unemployed through no fault of their own. There is much work that needs to be done in America. Our aging infrastructure is in urgent need of updating. How many more bridges will have to collapse before we wake up to the near-crisis state of our roads and bridges? Also, we need to be developing alternative transportation systems and alternative energy sources. There is more than enough work, that urgently needs to be done, to employ everyone who wants a job. I am not talking about government jobs. I am talking about government investment in the future of America that could result in millions of private sector jobs. Bids would be taken from private contractors on the various local projects, and the winning bidders would then hire local workers to do the work.

To those who argue that we cannot afford a major jobs program at this time because of the high budget deficits, my response is that we cannot afford not to tackle the unemployment problem. There is no possible way to make a very big dent in the deficit without a strong economic recovery. As much as I deplore the huge budget deficits and the skyrocketing growth in the national debt, I believe that, at this point in time, we must place a higher priority on ending the recession and restoring the economy to full employment than on deficit reduction. However, the two goals are not mutually exclusive. The high unemployment rate is a major factor in the high budget deficits that the nation is now running. When unemployed workers return to work, income tax revenue increases at the same time that government spending for unemployment compensation goes down. Therefore, reducing unemployment has the effect of also reducing the deficit.

Dr. Allen W. Smith is a Professor of Economics, Emeritus, at Eastern Illinois University. He is the author of seven books and has been researching and writing about Social Security financing for the past ten years. His latest book is The Impending Social Security Crisis: The Government’s Big Dirty Secret. Read other articles by Allen, or visit Allen's website.