Robert Pollin is Professor of Economics at the University of Massachusetts in Amherst. He is the founding co-Director of the Political Economy Research Institute (PERI). His research centers on macroeconomics, conditions for low-wage workers in the US and globally, the analysis of financial markets, and the economics of building a clean-energy economy in the US. His latest book is Back to Full Employment. Other books include: A Measure of Fairness: the Economics of Living Wages and Minimum Wages in the United States, and Contours of Descent: US Economic Fractures and the Landscape of Global Austerity.
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And welcome to this week’s edition of The PERI Report with Bob Pollin, who now joins us from Amherst, Massachusetts.
Bob is the founder and codirector of the PERI institute in Amherst. He’s a widely published author, his latest book being Back to Full Employment.
Thanks for joining us again, Bob.
ROBERT POLLIN, CODIRECTOR, POLITICAL ECONOMY RESEARCH INSTITUTE: Thank you very much for having me, Paul.
JAY: So what’s on your mind this week?
POLLIN: Well, it was a major week in terms of economic news, because on Friday we got the latest report from the Labor Department on unemployment, showing that the unemployment rate had eked down from 7.7 percent to 7.6 percent, the official rate. But the only reason that the rate went down was because 496,000 people, about half a million people, dropped out of the labor force. If those people had stayed in the labor force, the unemployment rate would have actually gone up to 7.9 percent. So the news on the job market is terrible.
Now, at the same time, on the same day, Friday, the White House put out the news that President Obama is about to propose his budget for the coming year, in which he supports the idea of cuts to Social Security and Medicare, the two most basic programs that represented what we have in our very, very modest welfare state in this country.
So Obama is affirming his support for the idea of fiscal austerity, for the idea that the overriding problem in the economy today is the fiscal deficit at the same time that the unemployment rate, the unemployment situation is actually getting worse.
And then one other thing, which is equally important. Only the day before, the news out of the White House: Obama was giving a speech to supporters, actually, in which he indicated that he was about to support the construction of the Keystone pipeline through the middle west of the U.S. And his argument as to why he would support the Keystone pipeline was that we need it in terms of jobs.
So on the one hand, he’s supporting austerity policies which are destroying jobs, which have no way through which they will create jobs. On the other hand, he’s making the false argument that supporting the Keystone pipeline is going to help create jobs. In fact, it is not going to help create any jobs.
The State Department itself, his own State Department indicated that the Keystone pipeline construction would maybe create 4,000 to 5,000 jobs per year. So if we took their high number, 5,000 jobs, note that that’s 1/100th of the number of people that dropped out of the labor force just this last month.
So Obama has no jobs program. He’s supporting austerity. He’s supporting cuts in Social Security and Medicare. And we are going absolutely in reverse relative to where we need to go, which is to support programs to expand jobs.
JAY: Now, explain something to me, ’cause as I–you know, I’m a–people know that watch I’m a dual citizen, but I grew up in Canada, so some of this detail I don’t get. I don’t understand. I thought Social Security was more or less a self-funding program based on employer and employee contributions. What has this got to do with the debt anyway?
POLLIN: Well, actually, officially it has nothing to do with it, you’re right, because Social Security is supposed to be funded out of payroll taxes, both on the employer and on the employee. Social Security is solvent. Social Security is going to remain solvent for their various estimates, 20 years with no changes. Over the long term it’s possible that we would need to make changes given the ageing population. But you’re right. It has nothing–none of this–Medicare also actually has nothing whatsoever to do with the increase in the fiscal deficit. The fiscal deficit in 2007, the last year of George Bush’s presidency before the 2008 presidential election, or let’s say the last year before the recession, the fiscal deficit of the United States was 1.7 percent of GDP. Note: 1.7 percent with the Bush tax cuts in place, with Afghanistan and Iraq wars being fought. The only cause for the huge jump in the fiscal deficit was the Wall Street crash and the Great Recession. That’s the sole cause. It has nothing to do with Social Security, and actually nothing to do with Medicare.
JAY: So just a quick note back where you started. These almost half a million people that have dropped out of the labor force, these are essentially people that have given up looking for work. So this is not people that have somehow found something else to do.
POLLIN: Well, we don’t know what the something is, but we know that right now the proportion of people of working age that are actually in the labor force is lower than it’s been since–basically since women started entering the labor force in much higher numbers. So this is really a watershed moment in which it’s very clear that people are giving up, getting out of the labor force.
Now, we do have some official data where you ask people, have you stopped looking this month? And if you include those people in the unemployment statistics and the people that have taken part-time jobs instead of–and wanted full-time, well, then we’re at 13.8 percent officially from the Labor Department. That’s 21.5 million people officially, according to the Labor Department. So we’re in–we remain in–we’ve discussed it a lot–we remain in an employment crisis. Austerity policies are putting us in the wrong direction. If you lay off people in the public sector, which is what austerity policies are doing, you are not going to automatically create more jobs in the private sector. That is what is actually happening now, and that’s why you have people dropping out of the labor force.
JAY: Well, it seems pretty clear the objective of both parties–the Obama administration and the Republicans–the objective is, I guess, what’s happening now, which is record-high corporate profits. The stock market’s doing great, mostly because wages are low. Money’s cheap. And I guess as long as there’s more recession, money’s going to stay cheap, which is also good for corporate profits, because they’re now borrowing–their financing costs are next to nil, and it’s a great time to buy new technology and put even more workers out of work. But where the heck does all this lead, then?
POLLIN: Well, yeah. Let me give you one more statistic. That is, from 2009 to 2011, the income, the entire income growth in the U.S. economy, the share of that entire income growth, the share that went to the top 1 percent was 121 percent. A hundred and twenty-one percent of all the income growth went to the top 1 percent. The other 99 percent saw incomes contract. That’s during our recovery.
So you’re absolutely right. We do not have a plan to accomplish anything other than what we see now, which is the rich feasting off of the austerity conditions that are giving them cheap money to borrow, low wages. And the employment for everybody else is getting worse.
JAY: Is this partly because the wealthy have discovered a moment in the economy where you can have low wages, recession, cheap money without any inflation–in other words, generally I would have thought traditional economic theory would be, when you go this long with cheap money, eventually that becomes inflationary, so you don’t want to keep doing that. But have they not found that it’s not being inflationary at all because the whole global economy is so depressed that you can carry on this practically zero money to the banks? I mean, I even–I just saw the other day you can get a commercial mortgage for a building–so if you have an office building–for 3.3 percent or even less. I mean, that’s extraordinarily cheap, I would think, for a commercial building. So, I mean, this is great, isn’t it? Like, practically free money, low wages, high profits. So who cares if the economy ever comes back?
POLLIN: Well, I think that’s a fair point. And I think that even more than that, Paul, that at least the right–and I won’t say Obama is part of this, at least not yet–that the right sees this as an opportunity not just for high profits now, but to eviscerate the welfare state, the modest welfare state that we have, to destroy unions, including public sector unions, and to permanently shift the balance of power in favor of the wealthy such that this kind of situation can go on indefinitely, which is no upward wage pressure, keeping unemployment rate high enough so that people are desperate for jobs, they don’t have bargaining power, and productivity keeps rising, and the gains from productivity go increasingly to the top. That’s the model that we’ve had. Unfortunately, if I may pin a date on it, roughly since the election of the late Margaret Thatcher. And that model is only getting intensified. This is the neoliberal model. Again, you could say it started with Thatcher, roughly, and Ronald Reagan. I thought it was in a crisis. It is coming out of the crisis by getting actually stronger, not weaker.
JAY: Alright. Thanks for joining us, Bob.
POLLIN: Thank you very much, Paul.
JAY: And thank you for joining us on The Real News Network.