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Posted by on May 30, 2011 in Economy, Politics, Society | 32 comments

No Stomach for WPA Jobs Program in Obama Administration

Jared Bernstein — former economic adviser to Pres. Obama and now writing a must-read blog at the Center for Budget and Policy Priorities — responds to Paul Krugman’s earlier column (emphasis is mine):

As I wrote the other day, it’s essential to turn the conversation back to what we should be doing on the jobs front, so I was glad to see Paul Krugman thinking along those lines this AM.  But I was struck by this ‘graf:

“For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners.”

[…]
But then there’s this: There will be no WPA-type programs in our near future. There was no appetite for them in the Obama admin in the midst of the worst recession since the Great Depression and there’s a lot less now. The reasons for that are interesting and I’ll speak to them another day. But it ain’t happening.

Several bloggers are commenting on this Bernstein post at the moment, but I will limit myself to two words: Rahm Emanuel.

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Copyright 2011 The Moderate Voice
  • SteveinCH

    Wow. The mayor of Chicago is at fault. Anyone but the President I guess.

    As for the Krugman column, he chooses to ignore certain facts. If the government were to reinstitute the WPA at nonunion rates for infrastructure projects, I will bet the response would be far lower than Dr. K expects.

  • Dr. J

    At this point, the Democrats will face a $700B credibility gap trying to implement such a program.

  • KATHY KATTENBURG

    The mayor of Chicago is at fault. Anyone but the President I guess.

    Whst an odd comment.

    You are an incredibly literal thinker, Steve.

  • KATHY KATTENBURG

    They’re not going to, Dr. J. That’s the entire point.

  • Dr. J

    Then we agree, Kathy. Except I don’t think I’d blame Rahm Emanuel.

  • superdestroyer

    Why should those people who purchased too much house, borrowed too much money, and did not manage their financial risk get a huge windfall from the government in the form of debt forgiveness whereas those people who were responsible still have to pay the full value of their loan.

    Why do progressives always seem to want to subsidize irresponsible behavior and punish people who act responsibly.

    There are people already employed in the road repair business. Hiring people in a new government lagency to fix roads means that the people who currently work in the road paving industry will lose their jobs.

  • The WPA was one very few programs that ended when the crisis was over.

    Among the political reasons against it, there’s still the massive debt that we have built up, and are obligated to keep building, that’s hampering any new program.

  • roro80

    Kathy — The real problem here is that nobody except those without one cares about jobs right now. They *should* care, but as Dr J and ProfE show, really they care more about deficit right now.

    Of course, having seen huge downturns managed well and managed very poorly by different companies, I do believe the idea that you hunker down and spend nothing because you’re not making enough is exactly how the poorly-managed companies do a downturn. The well managed companies, who spring back better than ever once the market returns, are the ones who spent the downturn investing, even though they were in the red. Unfortunately, what we’re going to see if we keep on ignoring jobs creation in favor of deficit reduction is that unemployment begets more unemployment, which will mean more home forclosures, which will mean further depressed real estate and lower consumption, and which will in turn mean even more unemployement.

  • DLS

    This isn’t the 1930s, Kathy. (and hacks like Krugman should know)

    About the only thing missing is a call by E. J. Dionne, or Robert Stein on this site, for another WPA, or another NRA (and NIRA, federal planning of every conceivable thing in our nation and society, etc.), or revived 1960s programs to accompany the 1930s programs. 1930s “alphabet soup” programs in accordance with our third revolution (massive government intervention and federalizing so much that was never meant to be federal) is old.

    As for something contemporary, I was one of many who said if we were going to have a huge-spending federal “stimulus” program, it should feature infrastructure (not white elephants or trophies, but serious infrastructure), which would have employed many. As we all saw, the Dems squandered their chance and spent so often wrongly as well as excessively, part of why the public voted GOP, to punish the Dems’ misspending (among the reasons) last November.

    We don’t need (and most properly don’t want) 1930s (or later, 1960s) massive federal undertakings, particularly after the Dems violated our trust in 2009-2010.

    As far as “mortgage reduction,” that’s antithetical (not merely inimical) to ethics (or morality) as well as to normal US politics.

    Haven’t the fools learned from the debacle of 2009-2010? (No.)

  • KATHY KATTENBURG

    Then we agree, Kathy.

    Ummm, yeah… we agree that the Obama admin is not going to institute a WPA-style jobs program at this point. I mean, is there someone who DISagrees with that? I don’t think there’s anyone who thinks Obama is going to do that now.

    I doubt that we agree on the other points — that a WPA-style jobs program was what was needed from the start, that everyone who supported a stimulus plan said that was what was needed, but that Obama was never going to go for that, so instead he went for a half-assed stimulus package that did not do the job the way it should have, which everyone who supported a stimulus plan had said it wouldn’t, and that now Obama has even less inclination to push for a WPA-style plan because there’s no longer the political capital for it. In other words, the stimulus package that DID get passed was inadequate, and because it was inadequate, the people who opposed it all along can say it failed because it cost too much money, rather than the truth, which is that it failed because not enough money was spent, and on the right things (like a WPA-style program) — and that means it’s even less likely that Congress could pass such a bill now, which is just fine with Obama and his advisers, because they had no appetite for pushing for one in the first place.

    I doubt you agree with me on ANY of that, Dr. J. When you say you agree with me that Obama is very unlikely to try to get a WPA-style program now, you’re really saying nothing meaningful, because that’s obvious to everyone.

    It’s the reason WHY Obama is very unlikely to try to get a WPA-style program passed now, and why he didn’t get one passed before now, where agreement is not universal and obvious to all.

    Kathy

  • KATHY KATTENBURG

    The real problem here is that nobody except those without one cares about jobs right now. They *should* care, but as Dr J and ProfE show, really they care more about deficit right now.

    I completely agree, roro.

    Kathy

  • JSpencer

    More tax cuts for the rich! Starve the beast! Mandatory study of Ayn Rand! 😉 As for the unemployed? Well… Soylent Green isn’t just for the elderly anymore!

  • KATHY KATTENBURG

    Mandatory study of Ayn Rand! 😉

    LOL!

  • Actually, I was saying that the WPA made more sense than other programs, because it stopped when the depression was over.

    Deficit spending is huge problem, because it’s mostly structural. When you walk into a crisis spending like you were already in one, you’ve already lost most of your options. Of course, there is the option of reviewing all spending in a bipartisan manner like, say, Simpson-Bowles, but that’s apparently too crazy. For that matter, so is ending Fannie and Freddie, cutting down defense by reducing our world-wide presence, bidding out drug and doctor services, and all the other blatantly obvious waste, but that’s also too radical. Nor does it seem that anyone can face the fact that most of the problems that caused the last hit, like derivatives worth more than several years of GNP, are still in place able to hit us again.

    Sorry, but a little more spending while ignoring everything else isn’t going to help.

  • KATHY KATTENBURG

    Who said “Ignore everything else,” ProfElwood? Cutting spending in the hopes of bringing down the deficit while ignoring everything else is not good, either.

    Kathy

  • Ignoring everything else is exactly what’s happening right now. If you’re not harping on it, you’re ignoring it.

    The debt/deficit is apparently one of those things that many of you think can be ignored, or even pushed, for a few more years. It’s not. Very few countries have made it to 200% GDP in debt without the bond markets rebelling, and we’re on course to do that in the next few years even if the economy recovers, which isn’t that likely. All the previous bailouts and stimuli failed to improve the private sector, and a WPA-type program probably won’t either.

  • DLS

    Prof. Elwood wrote:

    The debt/deficit is apparently one of those things that many of you think can be ignored, or even pushed, for a few more years. It’s not.

    That’s true for intelligent, principled adults. But what of so many childish people of all ages who view Washington as their parent (and unconstrained fount of all that could ever be wished and sought)?

    I’ve said it many times before: What’s going to happen when the money runs out? What’s going to happen when the music to the fiscal and monetary Musical Chairs game stops, and can’t restart?

  • KATHY KATTENBURG

    Ignoring everything else is exactly what’s happening right now. If you’re not harping on it, you’re ignoring it.

    If you’re not harping on it, you’re ignoring it? That is one of your odder comments, ProfElwood.

    But if it’s actually true that not harping on something is ignoring it, then you are ignoring continuing record high levels of unemployment and a housing market in freefall.

    Kathy

  • But if it’s actually true that not harping on something is ignoring it, then you are ignoring continuing record high levels of unemployment and a housing market in freefall.

    You’re asking for new spending when we need cuts. Unemployment and housing are related, in that construction was a major employer. It will take years to sell off the excess number of houses for sale. That’s a structural problem that a stimulus isn’t going to fix.
    Finally, I do support the housing price drop, because it was artificially high in the first place, and will eventually help more people afford their mortgage and rent. Why would you want to keep people paying too much for their housing?

  • SteveK

    Kathy, They really, really, really don’t get it and there is nothing you or I can say that will open their eyes. Their paychecks keep coming in, there are a lot of good deals around, and they’re not needing SS or Medicare… YET! I know your answer for the following will be both correct and proper but… Why bother?

  • roro80

    You’re asking for new spending when we need cuts. Unemployment and housing are related, in that construction was a major employer. It will take years to sell off the excess number of houses for sale. That’s a structural problem that a stimulus isn’t going to fix.

    Prof, as I said earlier, it’s clear that you think we need spending cuts, and that you think that’s more important than jobs. I also believe you think that that’s a rational position come to by using only facts. I think that’s incorrect, and that you’re asking for cuts when what we need is jobs. I come to this conclusion from facts, and it is rational. I think you’re wrong for rational reasons, even though there are certainly emotional reasons to think you’re wrong as well.

    As for the “structural problem”, well, no — there’s so much construction that needs to be done that it’s effectively unlimited. If there were enough money and people to do the work, there would be literally trillions in construction that is need of doing. In many cases, the skillsets are a little different between home construction and civil construstion, but in tons of cases, they are pretty similar skillsets. My point is that there is absolutely tons of work to be done to keep the out-of-work construction-sector workers in a job for a long, long time, if there were the will to do so.

  • Dr. J

    Prof, as I said earlier, it’s clear that you think we need spending cuts, and that you think that’s more important than jobs.

    I think the deficit is a more important and more actionable priority for the government.

    I disagree that the government can create lots of value-adding jobs at will. I support building infrastructure, and our repaved Divisadero Street looks great, but it became clear in the 2009 stimulus that there were a limited number of shovel-ready projects we could move on.

    The non-shovel-ready projects generate jobs too, but they may not be jobs the currently unemployed can do. Our Central Subway project has been underway since the ’90s, keeping planners, accountants, and politicians busy. But it took more than a decade–last year, when they started relocating utilities on 4th Street–before it created any real construction jobs. Projects like this don’t solve the unemployment problem.

  • I think that’s incorrect, and that you’re asking for cuts when what we need is jobs

    Really, what we need is income and production. There’s still too much money being directed in the wrong ways. Banking, medical care, higher education, war, and yes, entitlements are growing faster than the economy can accommodate, which leaves less for things that we do need. I’d love to make bridges with a WPA program (preferably without Davis-Bacon), but first, we’ve got to break away the money from where it shouldn’t be going.

  • KATHY KATTENBURG

    You’re asking for new spending when we need cuts.

    You are asking for spending cuts when we need more spending, not less.

    It will take years to sell off the excess number of houses for sale.

    Who are you going to sell ’em to, given that all the potential buyers are losing their jobs and putting more homes on the market via foreclosures?

    Why would you want to keep people paying too much for their housing?

    Sorry, Prof, you’ve lost me here. I haven’t an inkling what statement of mine you are referring to, here.

    Kathy

  • KATHY KATTENBURG

    Kathy, They really, really, really don’t get it and there is nothing you or I can say that will open their eyes. Their paychecks keep coming in, there are a lot of good deals around, and they’re not needing SS or Medicare… YET! I know your answer for the following will be both correct and proper but… Why bother?

    I don’t know. Really. I don’t know why I keep arguing with them. Everything you’ve said is correct. I just can’t stand it.

    Kathy

    ETA: Believe it or not, when you write this kind of comment, it makes me feel better. Like I’m not alone. Even though I know I’m not. So don’t stop asking me why I continue to bother. 🙂

  • KATHY KATTENBURG

    I think the deficit is a more important and more actionable priority for the government.

    Okay, so getting rid of the deficit is the first priority, and addressing the unemployment and foreclosure crisis is the second priority.

    So let me ask you this: After we get rid of the deficit, then can we start spending to create jobs, increase demand, and reduce the human suffering that the spending cuts have created?

    Kathy

  • KATHY KATTENBURG

    I’d love to make bridges with a WPA program (preferably without Davis-Bacon), but first, we’ve got to break away the money from where it shouldn’t be going.

    Okay, now we’re getting somewhere. If I understand you correctly here, you are saying you DO think we should increase spending — you just think we should spend our money on the right things, like infrastructure, and not on the wrong things, like war.

    Have I got that right?

    Kathy

  • Dr. J

    After we get rid of the deficit, then can we start spending to create jobs, increase demand, and reduce the human suffering that the spending cuts have created?

    Start spending? What are we spending on now?

  • You are asking for spending cuts when we need more spending, not less.

    Again, you feel safe ignoring the danger, I don’t. If the bond markets rebel, the interest payments (currently the third largest part of the budget) will balloon. Since most of our debt is in short-term bonds, and therefore constantly being recycled, if our creditors started demanding higher interest, that interest portion would also grow quickly. The government would have to choose between default, and true austerity. It’s a really bad choice.

    Why would you want to keep people paying too much for their housing?

    Sorry, Prof, you’ve lost me here. I haven’t an inkling what statement of mine you are referring to, here.

    The housing market is falling because house prices are returning to their pre-bubble level. When housing prices fall, rents should also eventually fall, although that takes a lot longer. That means that more people will be able to afford houses without resorting to dangerous high-interest loans or tricks. Falling house prices are bad for mortgage owners (like me) and banks, but they’re good for buyers and renters.

    If I understand you correctly here, you are saying you DO think we should increase spending — you just think we should spend our money on the right things, like infrastructure, and not on the wrong things, like war.

    Closer. We need more cuts than spending to avoid the default scenario, which would hamstring the government for even it’s most essential functions. But yes, we absolutely need to prioritize that spending and, clearly, war is a pretty stupid place to spend it. Graves in Afghanistan don’t help us much use over here.

    The problem with your Keynesian thinking, is that we were already stimulating this economy when it crashed, since federal, state, and local government, companies and citizens were already borrowing heavily. Putting gas in carburetor doesn’t work when the engine is flooded and broken.

  • KATHY KATTENBURG

    Start spending? What are we spending on now?

    You disagree that the government is spending, Dr. J? I have to admit, I’m a bit befuddled, since you’re constantly saying we have to cut spending to reduce the deficit.

    Kathy

  • KATHY KATTENBURG

    Again, you feel safe ignoring the danger, I don’t. If the bond markets rebel, the interest payments (currently the third largest part of the budget) will balloon. Since most of our debt is in short-term bonds, and therefore constantly being recycled, if our creditors started demanding higher interest, that interest portion would also grow quickly. The government would have to choose between default, and true austerity. It’s a really bad choice.

    Ah. And what do you imagine will happen if Congress does not raise the debt ceiling by the August deadline, and the United States defaults on its debts?

    When housing prices fall, rents should also eventually fall, although that takes a lot longer. That means that more people will be able to afford houses without resorting to dangerous high-interest loans or tricks. Falling house prices are bad for mortgage owners (like me) and banks, but they’re good for buyers and renters.

    I actually saw a piece about this on the news the other day. Housing prices HAVE come down, and it IS a buyer’s market right now, but a house that has come down in price from $800,000 to $500,000 still is unaffordable without a very good income. And if you do not have any income at all, then you cannot afford a house at any price.

    The problem with your Keynesian thinking, is that we were already stimulating this economy when it crashed, since federal, state, and local government, companies and citizens were already borrowing heavily.

    Yes, Elwood, but we were borrowing on the strength of collateral that wasn’t there. We were borrowing on the basis of fictional money that didn’t exist. Borrowing to finance derivatives and credit swaps, or whatever they’re called, is not the same as borrowing to finance a car or a home that you have the income to support the payments on. Also, “stimulating” the economy with financial transactions that are not physical or tangible does not increase demand as does stimulus that comes from new construction projects. This economy needs *demand.*

    Kathy

  • Ah. And what do you imagine will happen if Congress does not raise the debt ceiling by the August deadline, and the United States defaults on its debts?

    The same thing, but at 100% of GNP instead of 150% or 200%. However, I seriously doubt that whole debate is anything more than a lot of theater. We have decades, if not centuries, of history where congress kicks a can down the road. We have only a few rare moments where it honestly faced a crisis head-on. I’m expecting some can kicking, probably with some symbolic cuts. I hope I didn’t ruin the show for you by giving away the ending.

    This economy needs *demand.*

    The excessive borrowing created that demand. We now need to reduce the waste, so that people, companies, and governments can afford the stuff that they need. That involves a lot of things, but it seems congress isn’t in the mood to fix any of them.

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