It’s a Depression

The March employment numbers, out this morning, are bleak: 8.5 percent of Americans officially unemployed, 663,000 more jobs lost. But if you include people who are out of work and have given up trying to find a job, the real unemployment rate is 9 percent. And if you include people working part time who’d rather be working full time, it’s now up to 15.6 percent. One in every six workers in America is now either unemployed or underemployed.

Every lost job has a multiplier effect throughout the economy. For every person who no longer has a job and can’t find another, or is trying to enter the job market and can’t find one, there are at least three job holders who become more anxious that they may lose their job. Almost every American right now is within two degrees of separation of someone who is out of work. This broader anxiety expresses itself as less willingness to spend money on anything other than necessities. And this reluctance to spend further contracts the economy, leading to more job losses.

Capital markets may or may not unfreeze under the combined heat of the Treasury and the Fed, but what happens to Wall Street is becoming less and less relevant to Main Street. Anxious Americans will not borrow even if credit is available to them. And ever fewer Americans are good credit risks anyway.

All this means that the real economy will need a larger stimulus than the $787 billion already enacted. To be sure, only a small fraction of the $787 billion has been turned into new jobs so far. The money is still moving out the door. But today’s bleak jobs report shows that the economy is so far below its productive capacity that much more money will be needed.

This is still not the Great Depression of the 1930s, but it is a Depression. And the only way out is government spending on a very large scale. We should stop worrying about Wall Street. Worry about American workers. Use money to build up Main Street, and the future capacities of our workforce.

Energy independence and a non-carbon economy should be the equivalent of a war mobilization. Hire Americans to weatherize and insulate homes across the land. Don’t encourage General Motors or any other auto company to shrink. Use the auto makers’ spare capacity to make busses, new wind turbines, and electric cars (why let the Chinese best us on this?). Enlarge public transit systems.

Meanwhile, extend our educational infrastructure. So many young people are out of work that they should be using this time to improve their skills and capacities. Expand community colleges. Enlarge Pell Grants. Extend job-training opportunities to the unemployed, so they can learn new skills while they’re collecting unemployment benefits.

Finally, accelerate universal health care.


Originally published at Robert Reich’s Blog and reproduced here with the author’s permission.

10 Responses to "It’s a Depression"

  1. Anonymous   April 3, 2009 at 2:13 pm

    First, the single most important thing mitigating against the “entrepreneurial spirit” of Americans is the fear of losing healthcare. Who in his right mind would leave a job with benefits to be the next Bill Gates inventing something in his garage? I think that point should be hit hard by the democratic leadership. I also believe that a very strong public alternative should be offered – then we’ll see whether folks walk away from the private carriers (who are beyond greedy)or stick with the free enterprise system. Second, similar to the depression, we have many highly “over-educated” people who cannot find work. So much for education being the key to anything when the world economy has crashed.

    • Guest   April 3, 2009 at 3:38 pm

      Indeed. Actually US has a glut of overeducated workers who don’t create a cent of wealth: lawyers, investment bankers, tax optimisers, economists, professors of financial mathematics, ad. lib.

  2. Guest   April 3, 2009 at 6:08 pm

    I’ve learned through company connections that the Obama administration spending $1 billion building a plant in China to manufacture solar cells for the US market using technology licensed from a company in San Jose.

  3. Anonymous   April 3, 2009 at 7:24 pm

    Thank God that the Henry Fords, Bill Gates, Steve Jobs and Jeff Bezos of the world didn’t worry about the health plan they might leave behind to start their respective ventures. The only thing necessary in America is the opportunity to succeed and keep a good portion of what you have earned to do with it as you like. Which often is charity (not at the direction of the government).The fear I have for this country is not a country like China but a country with a good leader with a vision and plan to embrace capitalism and lure American businesses to that country. That country would provide a stable rule of law, good business infrastructure for conducting business (low taxes and reasonable legal system unlike America’s) and then actively court the top producers from the US. This might seem many years in the future but my advise to my teenage kids would be the same that my great grandparents had for my grandparents when they came to America. It was the land of opportunity for anyone who was wiling to work hard. Today we a country of 50% chronic whiners and looking for a way to game to the system or get a free handout at some else expense. I hope our youth get an opportunity to live in the same US I grew up in.

    • Guest   April 4, 2009 at 12:17 am

      So right, look at all the useless Engineers(Mechanical, Civil, Electrical, Aeronautical, Chemical), Computer Scientists, Biologists etc. Totally useless when we will have NO INDUSTRY~!After 13 all children should be put to work at jobs which suit their intelligence. If there are none, the parents can take care of them until they are 18. Nobody asked them to have kids!! The population should be vigorously pruned and only the most wealthy should be allowed their private education and that ediucation should be limited to MBAs. They will save our country!

  4. Wilson S   April 4, 2009 at 5:54 am

    Dear Professor Reich,what about inflation? If we print massive amount of money, wouldn’t that lead to high inflation eroding our standard’s of living as a result of a lower purchasing power for each dollar we have?

  5. Guest   April 4, 2009 at 3:56 pm

    While I applaud wholeheartedly that Prof. Reich has escaped his Obamabot-induced Obama trance, it would be lovely if Reich stretched beyond his current ideas of spend-spend-spend. (I do truly feel sorry that he fell into the whole Obama romance: I hate to say it, but The Emperor Obama has no clothes.)Prof Reich is intelligent enough to realize, much to his dismay, that this Depression is going to run its course. the real question is how much worse will it get, and how long will it last, and will the folks with pitchforks that Obama arrogantly thinks he can protect Wall Street from finally decide to take their government back from the current lawlessness running amok in the current administration.You see, the real problem by far is the simmering resentment and anger over the message Obama is sending to the close to 50% that did NOT vote for him (translation–those bitter pitchfork people), as well as the growing number of disillusioned Obama voters who are thinking: (WTF! why is Bush, I mean Obama doing Bush like things). that message is: “I think you are stupid bourgeouis who will be delighted at my “tax cut” of $10 back a week from your paycheck. While you glow over my largesse, I’ll just indebt our country to death, put folks who failed to pay taxes in my Administration, and dole out money to bankers, and any other rich guy who can’t handle a business but wants a handout.”The bottom line truly is that if someone doesn’t give Obama a Come-To-Jesus speech that his pretty words have only further enriched the Rich, while Tent Cities grow; if he fails to address the problem of Summers earning outrageous sums from his banker buddies while doling out money to (what a surprise) banks; if he continues to address and massage liberals and disenfranchise the rest; I have a really bad feeling that Change will be coming alright, and it won’t be the kind we’ll sing Kumbaya about.So what should we do to head off civil unrest?–Put bad guys in prison. Lets face it, someone in the financial industry has helped cause this ridiculous meltdown with massive fraud. Put them away. Do it LOUDLY and PUBLICALLY.That is the first step, and will deflate a lot of anger. The message Obama sends now is: “ah heck, the same people that caused this deserve money YEEHAAAW!Lets give ’em more!”–Second, since we’re giving money to just about anyone, why not directly to the American people? Not $10 frakin bucks! Why not $10,000? Can you imagine what would happen to the economy with that? Things would definitely move again. The mood would change.And thats the REAL problem with this country: the MOOD has to change.Obama better wake up, and wake up soon, or his own idealism and eloquent speeches will be overrun by reality, and he’ll be remember as the hip black guy who miserably failed and ran this country into a violent third world realm.(In case you wonder, I want the guy to succeed, but its pretty obvious we’re screwed).

  6. paul94611   April 5, 2009 at 12:22 am

    More debt in the attempt to mitigate the effects of too much debt will not create wealth or stability.Stimulus would be an excellent idea if we had the political will to pay it off when times are good. However, since there is no political will to pay our public debts, by either political party then we must do what we can and save all we can. We must reduce both our reliance on debt and our debt burdens to have a healthy economy. Save, don’t spend.

  7. Guest   April 6, 2009 at 8:34 am

    The Obama honeymoon will not last long. I smell Wall Street CEO blood in the political waters. I have a job, but I’m deeply worried about keeping it. (Auto Industry). My anger over Wall Street and the Federal Economic Regulators is growing Fast and Furious. Obama and Team is NOT tough enough on Wall Street. Pick up a pitch fork folks and lite a torch. We needs to have ourselves a little social unrest. I suspect no one in political office, including the President, can invoke the kind of actions needed to flush out the greed and unfairness of the Wall Street fiasco. Only large scale protests can provide the political will (cover) to get it done. We are heading down this path. A watershed momment will arive inspite of the Obama Administration rhetoric to soothe the sheeple.

  8. Guest   April 10, 2009 at 7:10 am

    Ah, Paul, so you are saying what I have been for nearly two years…The major difference with this depression is that the whole world is in it; no one’s got hold of the end of the roe.The underlying problem now is that the credit system itself is shot, and we have to rethink how to actually save in business and in personal life for our investments. The reason it is shot, by my estimate, is tat the debt sloshing round the world is around £250trn [I’d convert to $, but tht kind of figure is frightening in anything but Zimbabwean currency]. -Joseph Harris, Debt Control Man in England