Robert Reich: The problem is lack of demand and that's what has to be tackled

[flpoljunkie]

(Emphasis mine.)

The central problem is lack of demand -- and that's what has to be tackled.

Three of the four sources of demand have stopped working. (1) Consumers can't and won't buy because they're still under a huge debt load, can't get more credit, are afraid of losing their jobs (or already have), depend on two wage earners, at least one of whom is working part-time and pulling in less, or have to save. (2) Businesses won't invest and spend on creating more jobs if they don't see consumers willing to buy more. (3) Exports are stalled because the dollar is so high they cost too much, much of the rest of the world is still struggling with recession, and American firms can make things for sale abroad more cheaply abroad.

That leaves only one remaining source of demand -- government. We need a giant jobs program to hire people and put money in their pockets that they'll spend and thereby create more jobs. Put ideology aside and recognize this fact. If it makes you more comfortable call it the National Defense Jobs Act. Call it the WPA. Call it Chopped Liver. Whatever, we have to get the great army of the unemployed and underemployed working again.

Also: Put more money in consumer's wallets by eliminating payroll taxes on the first $20K of income (and make it up by applying payroll taxes to incomes over $250K.)

Also: Get more hiring by giving the states and locales interest-free loans -- so they can rehire all the teachers, fire fighters, police officers, and sanitation workers they've fired -- to be repaid when their state employment rates hit 5 percent or below.

Also: Get more credit by having the Fed return to "quantitative easing" -- expanding the money supply by purchasing mortgage-backed and other types of securities.

If we let the deficit hawks and government haters dominate this debate, as they have, the Big Dipper will continue for years. The Great Depression lasted twelve.

http://robertreich.org/post/953941192/forget-a-double-dip-were-still-in-one-long-big

[BeyondGeography]

1. I love the payroll tax idea

It would hit in the first part of their year when people are still licking their wounds from the holidays. Don't know how it pencils out but the psychological and practical impact would be fantastic.

[Tansy_Gold]

2. MANUFACTURING jobs

If you don't have an increase in the jobs that make the things that people buy, the money will all end up going to the countries that DO make the things that people buy.

Pencils and crayons
Books and dishes
Sneakers and staplers
Tires and TVs
Watches and wrenches
Underwear and bicycles
Brooms and sweatshirts and computers and sewing machines and knitting needles and paint brushes and toaster ovens and sunglasses.

These are the jobs that create wealth, that generate taxes, that keep the government functioning. The tax revenues have to come from somewhere, or eventually the government will be tapped out. (And no, it's not yet. The government still has "good" credit and lenders are willing to lend... for now. . . . .)

[eleny]

3. Not taxing the first 20K is a good idea

I'm a retiree and in Colorado they don't take state taxes out on the first $20K when you reach age 55 and none on the first $24K when you reach age 65. It does make a difference.

If the Fed did this for working people, that little bit extra money could mean a lot these days.

My 2¢

[flpoljunkie]

5. Your 2¢ makes a lot of sense. Interesting about Colorado and state taxes.

[earthside]

4. On the other hand -- BIG Picture

Mankind is using up global resources faster than ever - Telegraph

The growing world population and increasing consumption has pushed the world into ‘eco-debt’ a month earlier this year, according to the latest statistics on global resources.

Even the diminished 'demand' we have now is slowly (or maybe not so slowly) driving us to ruin.

What we need is a bold change in direction in how we live, in the way our economies are organized.

As long as we continue to operate under the paradigm that 'demand' can go on and on forever and that somehow the Earth will always manage to create a supply, well, any new prosperity will be very short-lived.

[flpoljunkie]

6. Put people to work doing green jobs to help both economy and the planet

[stubtoe]

7. Investing in our long-neglected infrastructure makes sense too.

But we also need to consider a shift towards a sustainable economy, not the "spend spend spend" model that has crashed, probably for good.

[KakistocracyHater]

8. He's correct, apply payroll taxes over $250,000 & he's more believable than

I am. Eliminating payroll taxes on the first $20,000 makes a helluva lot more sense too. Make him or Stiglitz Head of the Fed.