It’s time for an economic stimulus for the little guy: a job

Public funds have been used aggressively to bail out banks and other financial institutions from their mistakes and mischievous behavior. Sadly, even with the enormous government funds invested, these financial institutions are still not providing credit or mortgages essential to economic growth that would generate jobs and achieve full employment.

The rationale of the $785 billion-plus Troubled Asset Relief Program (TARP) was that certain financial institutions were too big to fail. But, while the government’s emergency funding did indeed save the mammoth institutions, TARP failed to resuscitate the economy or halt job losses, which continue unabated.

Whereas banks have been regarded as too big to fail, ordinary people have apparently been regarded by the administration and Congress as too small to help and too weak to save. Consumer demand, which accounts for more than two-thirds of our gross domestic product, is essential to reviving our economy and, ultimately, ending the foreclosure crisis. More than 15 million of our fellow Americans are unemployed, or 9.8 percent, and if you count those who are unemployed for more than six months and are so discouraged that they are no longer looking for work, or just doing part-time work then the unemployment rate is almost double, at 17 percent.

More devastating still is the 26 percent unemployment rate among teenagers and the tragically high 50 percent unemployment rate among African American teens not enrolled in school. Alas, even as the stock market has rallied, rising over 50 percent since its March 2009 lows, job losses have continued steadily upward, too. Even Alan Greenspan, generally an optimist, has just predicted that unemployment will break the 10 percent barrier and stay there for some time.

There appears to be a belated recognition that this dire situation has to be addressed quickly. The most prominent solutions being considered by the administration and Congress are:

• Extending unemployment insurance beyond the six months now in effect for the millions who have already exhausted this source of income and for the millions more who are about to lose this safety net;

• Subsidizing healthcare for the chronically unemployed;

• Continuing to provide subsidies of up to $8,000 for first-time homebuyers.

These well-meaning measures would cost many tens of billions of dollars and would do nothing to deal with the real problem, which is how to create jobs for millions of unemployed people.

But it is possible, and to guarantee an effective result, we must create a specifically targeted program that would create jobs. Jobs have been lost because consumer demand has collapsed. The collapse is due to a shortage of paychecks and total lack of credit. In a vicious spiral, the shortage of paychecks is both the cause and effect of weak hiring. We cannot sit around waiting for a deus ex machina to fix this for us or, more mundanely, pin our hopes on rising exports. We need to act, and only government has the capacity to launch the necessary, all-out infrastructure program reminiscent of the Works Progress Administration (WPA) of President Franklin Roosevelt during the Great Depression.  The WPA immediately generated jobs and the invaluable infrastructure that we all still benefit from today.

As Robert Frank points out in The New York Times, with consumer spending and business investment collapsing, “the government is the only actor with both the motivation and the ability to jumpstart the economy” and achieve what is arguably the most vital of all objectives: job creation. The best way to turn this catastrophic unemployment around is to provide a job for every able-bodied adult so that he or she can become a productive member of the workforce and fuel economic growth.

To those who insist that we can’t afford it, I say that instead of paying millions of people unemployment insurance to produce nothing (at an annual cost of $150 billion), why not use the money to provide millions of jobs? Each jobless person could be paid about $300 a week, roughly equal to the minimum wage, until he or she finds a better-paying job.

Instead of being tax users, who in addition to weekly unemployment checks may be receiving food stamps, rent subsidies and welfare, they would become taxpayers. Instead of being consumers only, the newly employed would be producers, who would add to the size and quality of the total economic pie. All Americans would benefit. Arguably, the most important benefit of such a program is the renewed self-worth of those receiving wages for work, rather than getting a handout. In this way we turn lemons into lemonade.

Pay in the government program would need to be kept low so there was an incentive to find better-paying, private-sector jobs. Government should not compete for staff, but rather, be the employer of last resort. Each employee could be given one day a week off to seek other work. In this way, everyone would be efficiently employed, and productive and American taxpayers would get something for their money.

This program would replace unemployment benefits and would apply to everyone. For many young people it could serve as an apprenticeship and for many others it would be a stepping-stone to a lasting career.

No one would be compelled to work, but no one would receive an unemployment check, welfare or food stamps without working. It’s only fair.

This must not be confused with socialism. It’s an optional program that replaces the more socialist practice of handing out government checks. It is a safety net during a recession but also inspires people to get work in the private sector.

The economic crisis provides an outstanding opportunity to bring real, permanent and constructive change, which was the promise that won President Barack Obama the election. With so much necessary and invaluable work to be done, no one should be unemployed. We should create our own demand and employ every willing and able worker.

The most satisfying safety net of all is a job. Bill Gates has advocated helping the most deprived with “creative capitalism,” and the most creative capitalism of all is job-creating capitalism for all citizens.

America can and should employ those who need a job. It would eliminate poverty. We can build the things that really improve our country and our quality of life — schools, hospitals, highways, railroads, airports, seaports, bridges, tunnels, electric grids, water systems, sewer systems and dams. Let’s train and retrain the unemployed, especially the young, newly unemployed and the yet-to-be employed.

In addition to infrastructure jobs, which may not be immediately shovel-ready, the unemployed can help plan, direct and audit innumerable vital projects. They can help in schools, courts, hospitals, childcare centers, correctional institutions, R&D labs and vocational centers.

America does not need to depend on other countries to create demand, but instead can generate it domestically by building an enviable infrastructure and a better quality of life for all while achieving full employment.

Davis, a shareholder in The Hill’s parent company, is an economist, an MBA graduate (with distinction) from Harvard Business School and author of From Hard Knocks to Hot Stocks (William Morrow and Co.) and Making America Work Again (Crown). His e-mail address is This e-mail address is being protected from spambots. You need JavaScript enabled to view it

---