Saturday, December 27, 2008


As the new administration tries to formulate its economic goals, it seems to be consciously aiming low. At first, President-elect Obama hoped to generate 2.5 million jobs in his first two years. Later, he upped the target to 3 million jobs. That would be better, but it’s still a rather paltry number and would hardly constitute a full recovery for
the economy.

Consider the basic numbers:

--In November, according to government statistics, 10 million Americans were unemployed. That’s more than triple the current target for the next two years.

--The American economy has lost 2.6 million jobs since the peak in June 2007 for total private employment. In November 2008 alone, employment levels fell by 533,000. When December numbers are released, we may be close to or even beyond three million jobs lost in a year and a half.

--According to the US Department of Labor, the natural rate of increase in the work force is approximately 100,000 persons. Thus, every 24 months, 2.4 million jobs would be needed just to stand still.

--So, merely to get back to the June 2007 level will require 2.6 million jobs plus 100,000 for each month thereafter. Eighteen months later, we’re already 4.4 million jobs short – and digging deeper.

--By the mid-point of the first next administration the deficit compared to mid-2007 will be 6.8 million jobs.

When facing the worst economic crisis in 80 years, it may be good politics to lowball expectations. Of course, Obama isn’t the first politician to try to lower expectations. Recall that in far less challenging times Bill Clinton pledged to produce ten million jobs by 2000. It sounded bolder than it was (the natural increase in the workforce would have been expected to eat up almost all the 10 million jobs), and he overshot his target: while the civilian workforce grew by 14.5 million in his two terms, the ranks of the employed soared by 18.4 million. Unemployment fell by 3.9 million workers, pushing the unemployment rate to below 4 percent.

This is not an argument of a return to Clintonomics. On the contrary, America needs not just a cyclical recovery, but a genuine economic restructuring. We shouldn’t try to return to the way things were, but to go forward to places we’re never been. We need to become a goods-producing nation again. So much so that we can replace some imports with domestic production and produce in excess of our needs. That’s the only way to pay down our enormous debt to foreigners without a major inflation. My only point is that prudent politics and sound economics can produce two radically different targets. Should the natural caution of politicians triumph, the best chance we may ever get to revamp the economy may be wasted. Please, Obamistas, aim higher!

Charles Blum


  1. On the subject of aiming low we have to keep in mind that the numbers Charlie cites have been on-going for years. We have been aiming low every time the net new job creation does not exceed 100K per month. The Bush Administration (and Clinton) have effectively confirmed the old adage that figures lie and liars figure with the changes introduced in the employment data over the years. Economists like Morici and McMillion have repeatedly explained what Charlie wrote about. Workers who drop off the rolls of company employment, sell junk over the internet as a last resort or simply drop out of the statistics take our real employment change to a totally different number than politicians who want to obfuscate want to present us via their spin. some estimates take the unemployment rate over 12%. A new name is under-utilization. A person without income doesn't care what it is called - they are still unemployed in any meaningful way. Lest we forget the drag on unemployment funds across the country has put about 30 states into very precarious positions with their trust funds. Is that the next monumental bailout? I'd urge the Obama administration to pay attention to reality and not manipulate statistics for political gain. The public is onto the scam.

  2. An addendum to this post written on January 12:

    It's only partially gratifying to see the progression in the Obamista job targets: during the campaign, the goal was a paltry one million new jobs; after the election, the aim was three million jobs; last weekend it rose as high as 4.1 million new "and saved" jobs by the end of 2010.

    When Obama says that only government can restart the economy, he's only half right. A giant stmulus package on the order of $775 billion probably can support something like four million jobs. But that's still no recovery. Taking into account the new workforce entrants and the five million jobs lost in the current downturn four million jobs entirely new jobs wouldn't allow us even to run in place.

    To complement Obama's proposed program, Democrats should reach out to Republicans and see how best government can encourage massive new private investment. If over a period of some years, private investment could match the public spending, we might get a real, sustainble recovery without unsustainable debt.

    I've advocated for a radical change in our taxation of capital spending on new plant and equipment as one such measure, and a key one I'm convinced. We need urgently to start devising other steps to incentivize private capital spending in this country. By judiciously combining public and privae investment, we are likely to get quicker passage of needed legislation and an earlier start on new economic activity.

    As that materializes, we would be able to continue revising the job-creation target upward toward the red zone of real economic recovery.

    Charles Blum