The Needed Economic Stimulus and the Needy

It’s now clear that the American economy was headed for a recession even before the terrorist attacks of September 11. But surely the suddenness and sharpness of that descent was intensified by those atrocities.

Part of the evidence can be seen in the fact that not only are such key economic indicators as employment, production, profits, and incomes falling, but their decline has accelerated markedly. Unemployment is now at 5.4 percent, up from 4.9 percent for September—the biggest monthly increase since the recession of 1980. In mid-2000 the national unemployment rate was just 3.9 percent.

In human terms that means that businesses reported 415,000 jobs were cut during October. Overall, a total of 7.7 million people are now out of work. Rates for every major demographic group—adult men and women, teens, whites, blacks, and Hispanics—rose significantly.

Unemployment among Hispanics is now at 6.4 percent, up from 5.6 percent a year ago. African Americans sustained a full 1 percentage point increase in their unemployment rate in October alone, pushing it, at 9.7 percent, almost back to double-digit levels. It was only a year ago that the black unemployment had fallen to a 50-year record low of 7.2 percent.

Such sectors of the workplace as the travel and tourism industry have been swamped by layoffs, and such cities as New Orleans, Las Vegas and New York are facing immediate futures that are even more alarming than the overall national picture.

Equally worrisome, economist Bill Cheney, of John Hancock Financial Services, told the Washington Post that this bad news isn’t the worst of it. “The economy could easily be shedding 200,000 to 300,000 jobs a month for the next 3 to 4 months, and a 6-percent unemployment rate by the New Year seems very possible right now.”

These facts and these prospects are why the House of Representatives’ top-down approach to stimulating the economy—the $99-billion bill they recently passed, which mainly gave tax breaks to corporations and those at the top of the income scale—was so outrageous.

Those provisions would give the top five percent of taxpayers a total of $15.3 billion, while taxpayers in the bottom 80 percent who missed out on this year’s tax rebate would be given a total of $13.5 billion.

Yet, Americans who are most likely to face a drop in income from the loss of a job are, guess what, in the bottom 80 percent, not the top five percent.

Senate Democrats have vowed to push through their own plan that gives greater benefits to lower-income taxpayers and those who’ve lost their jobs.

The passage of a more inclusive stimulus package can’t come too soon. For one thing, what the Senate must do is repair the gaps and tears in the social safety net so that it can effectively play its historical role in stabilizing economic demand during a recession. Ignoring that necessity now could lead to catastrophe.

The Great Depression underscored in dramatic fashion that a social safety net was needed not only out of compassion for individuals but to protect the economic demand which is the underpinning of the whole society’s stability.

Consumers will spend only when they have money and confidence in a secure economic present and future. Companies will invest and hire workers only when they have customers. That meant protecting middle- and low-income Americans from drops in income due to job losses via programs—unemployment insurance, a hard-earned tax rebate, or welfare—that can keep them spending in order to maintain a stable demand for products, and thus, a stable economy.

The need to continue this bundle of protections—to help individuals and to help the society as a whole—couldn’t be more poignantly apparent.

For example, in Louisiana now less than one-fourth of unemployed workers are eligible to receive unemployment insurance. That circumstance, which is among the worst of all the states, must be corrected.

And: the earlier tax cuts that shrank the federal surplus bypassed 34 million low- and moderate-wage earners who earned too little to qualify for the rebate checks sent out last summer. That must be corrected.

And: the five-year term limits imposed by the 1996 Welfare act will soon expiring, leaving an uncertain future for those recipients who faced barriers to employment even during better economic times. It makes no sense now to run the welfare program, originally intended to counterbalance economic downturns by enabling those left out of the workforce to maintain some level of purchasing power, with a time clock. “Turn off” the time clock and restore welfare’s intended economic function during next year’s reauthorization debate.

If we’re to stabilize the economy, which means encouraging high consumer demand, we must provide relief to those facing the greatest risk of economic hardship.

This is the time for all of us to share the economic sacrifice. Putting the greatest burden on low-income communities is not just morally wrong. It doesn’t make economic sense.

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