Health care reform has dominated politics for the past few months, but that doesn’t mean there aren’t other serious issues that Washington must address. President Obama has spent his entire time in office so far leading a nation mired in the worst recession since the Great Depression, one that has eliminated 8.4 million jobs since it began in December 2007. Although unemployment last month fell slightly to 9.7 percent, January still saw a loss of 20,000 jobs, and the broader measure of unemployment and underemployment stands at 16.5 percent. Understanding that an unemployed voter is not a happy voter, and an unemployed taxpayer not a source of revenue, Obama and congressional Democrats are preparing to introduce legislation in Congress this week designed to spur employment. It’s a politically and economically smart move, as long as their other priorities aren’t forgotten along the way.
Unemployment is a lagging indicator of our economic health. While the stock market has recovered from the freefall that sent stocks tumbling to record lows last March and the economy grew 2.2 percent and 5.7 percent in the last two quarters of 2009, millions of Americans remain out of work as businesses remain wary of hiring new employees. The end of the recession sparked by the housing bubble and the global financial crisis has not meant the end of a personal financial crisis for those who are still out of work. As a result, consumer spending and tax revenues are still far below pre-recession levels. This does not bode well for an economy that depends on domestic consumption for a major part of its growth.
The current slow recovery has instead been engineered on the back of a large stimulus package and will collapse once the infusion of government spending runs out if employment does not return to sustainable levels. Former President Roosevelt discovered this the hard way when he attempted to balance the budget in 1937 and slashed government spending. With unemployment near 14 percent, the economy quickly reversed course and sunk into another recession, reversing the gains of the New Deal.
We’ve had 70 years to learn from this mistake, but Democrats only seem to be getting part of the message. Their attempt to pass a jobs bill may be undermined by Obama’s talk of cutting deficits, including what was the worst line of his State of the Union speech: “Families across the country are tightening their belts and making tough decisions. The federal government should do the same.” It’s hard to take this as anything more than cheap populist rhetoric, because he has clearly demonstrated that he knows deficit spending is necessary during an economic downturn. Yet at the same time he has also proposed a spending freeze and a deficit reduction commission. If Obama’s foray into conservative messaging is an attempt to shore up political support in advance of this year’s elections, he would do well to remember that voters will only be asking themselves if there are better off than they were two years ago. It’s the economy, stupid, and they don’t particularly care how you saved it.