April 20, 2019 | 67° F

O'BRIEN: U.S. should recommit to employment pledge

Opinions Column: Policy Over Politics


Two U.S. Senators rolled out stunning proposals this week that would fundamentally change how the United States government deals with economic downturns and persistent unemployment. Both Senators Cory Booker (D-N.J.) and Bernie Sanders (D-V.T.) expressed support for a “job guarantee,” a type of program designed to act as a permanent backstop to unemployment. The idea itself is so riddled with flaws that it is probably unworkable in practice, but that is almost besides the point. Rather, its truly important contribution to our national discussion will be forcing America to reexamine — and hopefully reaffirm — our government’s longstanding pledge to stabilize the economy and ease financial hardship within our borders.

Immediately after World War II, the world’s wealthiest nations remade themselves into the modern states we see today. Scarred by the widespread devastation caused by the Great Depression and the destructive conflict that followed, they set out to create a safety net to guard citizens against the harshness of unfettered capitalism. This included setting up national insurance systems, pension schemes and aid to the poor. At the center of these packages were commitments to stabilizing economic activity, particularly inflation and unemployment. In the aptly-named Employment Act of 1946, the United States made such a pledge, declaring it the responsibility of the federal government to ensure “maximum employment” and economic stability within the framework of a market economy, a promise still on the books today.

The Employment Act codified into law what most economists now believe: In downturns, government intervention is often necessary to stabilize an economy. In the post-war period, this balancing act worked quite well. Recessions were short and unemployment was usually quite low. The two institutions tasked with this stabilization — the Federal Reserve and Congress — did their part, stimulating the economy during slumps and slowing it down when inflation lingered. The reasoning behind this strategy is twofold: it moves the economy back to its long-run trajectory faster than doing nothing and fights the problems associated with extended unemployment

As proponents of a job guarantee argue, the federal government has failed in recent decades to live up to its pledge. Unemployment has been consistently higher than in the post-war era and output has been persistently below its potential. During the last recession, Congress and former President Barack Obama implemented a textbook solution — a massive stimulus package of spending increases and tax cuts — to fight skyrocketing unemployment. While this bill created millions of jobs and averted an economic catastrophe, its effects were subdued by spending cuts in the following years. The recovery from the Great Recession has been historically steady, but slower than it would have been had the government taken bolder action.

The U.S. government should learn from the mistakes of the last few decades and recommit itself to the pledge it made in 1946. There will inevitably be more recessions and periods of high unemployment. But how deep those downturns become, how long they last and the severity of the hardship they bring will be products of our political system. We can choose to embrace macroeconomics or we can cast it aside and subject future generations to the consequences.

Conservative critics will likely have a field day picking apart the specifics of various job guarantee proposals, and in a narrow sense they will be justified. The idea is striking in its ambitions, but unlikely to fulfill them. It poses logistical issues that appear nearly insurmountable, and its cost is politically infeasible. While these criticisms may be valid, simply poking holes in these proposals does not remove the problem they aim to solve. The simple truth is that the American government needs to get better at fighting unemployment.

A number of large economic reforms are gaining popularity in part due to this government failure. The idea of a universal basic income gained steam first in libertarian, and now progressive circles. An infrastructure jobs program is one of the few issues on which both parties agree (although they are fiercely divided on the details). A universal child allowance, already adopted by many of our peers, has become a mainstream idea. Each of these proposals provides insight that could improve our eventual policy choice, but we will lose out on those perspectives if we insist on incrementalism.

Action on big issues is ultimately sparked by grand ideas. Initial solutions often seem clunky, expensive and impractical, but they serve a purpose. Big ideas force people to reimagine what is possible and reexamine the status quo using new criteria. The original proposal may remain just that, but the ensuing discussion refines ideas and produces better policy in the end. A job guarantee is just the start of a long debate on how we should approach recessions in the future, and given our recent struggles, it is a debate we desperately need. 

Connor O'Brien is a School of Arts and Sciences junior majoring in economics. His column, "Policy Over Politics," runs on alternate Thursdays. 


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Connor O'Brien

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