Economy 2010 Part 2

If you thought I was downbeat in my new year assessments, here's how Bob Herbert began his first column of the year this week: "I’m starting the new year with the sinking feeling that important opportunities are slipping from the nation’s grasp. Our collective consciousness tends to obsess indiscriminately over one or two issues — the would-be bomber on the flight into Detroit, the Tiger Woods saga — while enormous problems that should be engaged get short shrift."

Herbert begins his uneasy litany with the problems of unemployment and housing. "Forget the false hope of modestly improving monthly job numbers. The real story right now is the entrenched suffering (with no end in sight) that has been inflicted on scores of millions of working Americans by the Great Recession and the misguided economic policies that preceded it."

Those "false hopes" turned out Friday to be false in more than one sense, as unemployment rose more than expected in the first December assessment, though far below the worst levels last year. This Times story checks with the usual economics suspects, and as usual they don't agree on what should be done. Some continue to call for another big dose of government spending, but the Screeching Right is focused on the "socialism" of that prescription, while of course also screaming that President Obama isn't doing anything to create jobs.

Meanwhile, Obama is getting little press or credit for the substantial accomplishments of the Economic Recovery and Reinvestment Act spending, which the Center on Budget and Policy Priorities says has kept at least 6 million Americans out of poverty, and lessened the severity of poverty for at least 33 million more. The Congressional Budget Office affirmed that the stim has created or saved from 600,000 to 1.6 million jobs, a fact that got much less press than the purported "overestimate" earlier by the White House, of 650,000 jobs.

Such current or future spending takes time to create real jobs, especially when the stim is a "Reinvestment" package as well--targeted not just to infrastructure but the new energy economy. (See part 1 below.) But among other pressing problems (continuing housing mess, slow to nonexistent financial regulation reform) the one that's looming now--with the most impact on employment and the national economy--is the severe slump in state government income.

In his Friday column--"Invitation to Disaster--Bob Herbert zeroes in: "This is an arrow aimed straight at the heart of a robust national recovery....This is not a disaster waiting to happen. It’s under way. Without substantial new federal help, state cuts that are now merely drastic will become draconian, and hundreds of thousands of additional jobs will be lost. "

As usual, California leads the way, and Governor Terminator's budget message on Friday was full of cuts of unparalled dimensions and cruelty, as well as a churlish tone regarding federal responsibilities. This state is already reeling from last year's cuts, and their effects haven't even been fully implemented.

The dire state that states like California and New York are in (as well as Commonwealths like Pennsylvania) is due in part to political failures--some of them institutional, some of them due to past gutless expediency, and many of them, especially in California, due to the past "successes" of the Screeching Right in choking off tax money in favor of corporations and the rich.

But the banks were hardly paragons of virtue when the federal government had to bail them out. If there is anything too big to fail without catastrophic consequences, it's state governments. Way too many jobs are directly and indirectly affected, as well as services to the common good, obligations to those who worked and contributed in good faith and did their duty to their families, as well as those who can yet contribute to a better society.