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September 12, 2010

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Posted: 11 Sep 2010 11:03 PM PDT

"Obama Should Follow in FDR's Footsteps"

Posted: 11 Sep 2010 02:34 PM PDT

There are lots and lots of things that need attention in our cities and counties, starting with, but by no means limited to, infrastructure. Labor and raw materials are relatively cheap due to the recession, and interest rates will never be lower, so why don't we hire people to do what needs to be done?:

Obama should follow in FDR's footsteps, by Nick Taylor, Commentary, LA Times: As President Obama weighs his options for adding jobs and pumping up the economy ... he might look back for guidance to Franklin Roosevelt.
Indeed, Obama's experience so far resembles FDR's first uneven stabs at job creation. Roosevelt accepted the Democratic nomination in 1932... When he took office, with the unemployment rate at 24.9%, he created the Civilian Conservation Corps... But it was too limited... The "CCC boys"  ... never numbered more than 300,000... Roosevelt continued his efforts with the Federal Emergency Relief Administration..., it put 2 million people to work by the fall of 1933...
These efforts still left far too many people out of jobs. As winter approached, relief administrator Harry Hopkins persuaded Roosevelt to create a temporary jobs program that would give the private economy a few more months to pick up steam. The Civil Works Administration put more than 4 million workers into jobs during the winter of 1933-34. They mostly repaired roads, parks and public buildings, but there were jobs for teachers and other white-collar workers too.
The CWA ended, as designed, after just five months. But unemployment remained unacceptably high. Like Obama today, Roosevelt had midterm elections to think about. His critics accused him of socialism and fretted publicly that large deficits would ruin the country. They insisted that workers would ... never be weaned off the government's largesse.
But despite his vocal opponents, in January 1935, FDR announced his intention to launch the massive jobs program that became the Works Progress Administration. ... The WPA addressed a range of long-standing infrastructure needs, including roads and bridges, hospitals and water treatment plants, and airports. Its workers fought floods and forest fires and cleaned up after hurricanes. Its sewing rooms made clothing and blankets that went out to disaster victims. The WPA also employed nurses, doctors, teachers, librarians and artists. By the fall of 1936, 3.3 million people were on the WPA payroll. The stimulus provided by those jobs buoyed the economy. By the spring of 1937, after Roosevelt's landslide reelection, the country's unemployment rate had dropped to 14%.
FDR then, again like Obama, heard calls to cut spending and balance the budget. ... And he heeded them. He slashed WPA spending by two-thirds ... for the year starting July 1937. Half as many workers — 1.65 million — would get WPA paychecks.
At the same time, Roosevelt tightened bank reserve requirements. Deductions for the new Social Security System took more money out of the economy. ... That fall, industrial production fell, the stock market plunged and, by the end of the year, unemployment had surged, with another 2 million workers losing their jobs. Republicans called it the Roosevelt recession.
In the spring of 1938, Roosevelt decided he'd had enough of budget-cutting. He resumed spending, and soon the WPA rolls were back above 2 million, on their way to an all-time high of 3.4 million.
The lesson for Obama in all this is that stimulus works, and the sooner and more aggressive, the better..., a push today on new infrastructure would also provide lasting and necessary benefits. ... An America prepared today to meet the future will be applauded long after this recession is consigned to the history books. ...

Millions of people out of work, vast needs throughout the nation, and a president unwilling to fight to bring the two together because, I don't know, it's not bipartisan? Whatever the reason, there are many, many areas where we could put people to work where the benefits exceed the costs, including valuable public goods that the private sector will not provide, but we don't seem to be willing to allow the government to broker these exchanges. It's frustrating. People could be helped, and it would make us all better off, but it's hard to see how this could possibly happen at the scale that is needed.

Update: I should have waited until this came out before doing this post:

Building the Bridges to a Sustainable Recovery, by Robert H. Frank, Commentary, NY Times: Last year's economic stimulus program helped stem a crisis that was poised to rival the Great Depression. ... Now, those stimulus payouts are waning... As a result, a fragile economic recovery is faltering. ...
All the while, however, we're facing vivid examples of failing infrastructure across the country. Clearly, the maintenance and rebuilding of bridges, roads, water systems and the like can't be postponed forever. And the work will never be cheaper ... than right now, when high unemployment and excess capacity have put the opportunity cost of the necessary labor and equipment near zero. ...
According to data compiled by the civil engineers' society, planned spending across 15 categories of infrastructure, including aviation, drinking water systems, energy programs, levees, roads, schools and wastewater treatment, will fall short ... by a cumulative total of more than $1.8 trillion in the next five years. ...
Deferring maintenance does nothing to alleviate our national indebtedness; in fact, it makes the problem far worse. According to the Nevada Department of Transportation, for instance, rehabilitation of a 10-mile section of I-80 that would cost $6 million this year would cost $30 million in two years, after the road deteriorated further.
If such a project is at all representative, spending an extra $100 billion nationwide on interstate highway maintenance now would reduce the national debt two years from now by several hundred billion dollars...
Some people object that infrastructure spending takes too long to roll out. But many projects could be started immediately. And remarkably low long-term interest rates imply that markets expect several more years of sluggish economic activity, so even projects that take a little longer would still be timely.

But won't this extra spending make the deficit problem worse? A better question is this: Why is anyone worried about short-run deficits in the first place? Deficits are a long-run problem..., the short-run imperative is to increase total spending by enough to put everyone back to work as quickly as possible. ...

With the midterm elections looming and deficit hysteria at a fever pitch, it is far from certain that even the president's modest proposal can gain Congressional approval. If it can't, our infrastructure clearly isn't the only thing that needs fixing.

Why Has Union Membership Declined?

Posted: 11 Sep 2010 10:33 AM PDT

UC Berkeley's Claude Fischer on the decline of unions:

Labor's laboring effort, by Claude Fischer: ...Historians and sociologists have tried to figure out for many years now why union membership in the United States is so low – now about one-eighth of the employed – compared to elsewhere in the world and why it has dropped so far – down from about one-third in 1955. ...
The United States' rate of "union density" ... is far below of that of most western European nations (with the interesting exception of France) which range from about 20% to about 60%. While union membership rates have been declining there as well, the drop-off is not nearly as steep as here. ...
As the graph below shows, unionization leaped up during the Depression, New Deal Era, and early post-war period. Since then, it has dropped steadily... Recent studies point to a few key explanations for the precipitous drop in the last half-century. One, clearly, is the ... disappearance of the blue-collar industrial jobs that once spurred demand for unions... Another factor is globalization – both U.S. manufacturers (and now service providers, too) moving ... to low-wage nations and workers from low-wage nations moving into the U.S. economy. Although unions have had a few successes organizing a few immigrant workers, for various reasons the immigrants are a hard-to-unionize work force.

chart showing union density by year, 1880-2000
Union density

Political constraints on unions have also become much more inhibiting over recent decades. Starting with the end of the New Deal and intensifying with the Reagan Administration in 1981, the rules on organizing and the regulatory oversight of the workplace have made it harder to establish and sustain unions. Also, decentralization in the United States ... allows states to set many labor laws. The states with anti-union laws make it especially hard to unionize and, by attracting business, undermine unionization in other states.
In Europe, union membership is often a routine, required part of getting a job and unions have official or semi-official roles (along with associations of employers) in national government... Such a central role for unions would be hard to imagine in the United States. How come?
Why Weak Labor?
This question has perplexed scholars for over a century. Commonly called the "Why No Socialism in America?" question...
The answers have been all over the board: American workers did not need to organize because they flourished without unions; American workers were divided by ethnicity and race in ways European workers were not; employers in the United States were unusually powerful  ... and got governments to crack down on unions (the notorious cases involve state governors using the National Guard to break strikes); the American dream of self-employment distracted workers; the American electoral system prevented a labor party from growing; Americans' individualism led them to reject collective action; and many more. ...

"Do you approve or disapprove of unions?" chart showing Gallup results
Gallup results. Dark green: approve; light green: disapprove

The political restraints on unions seem to be much harsher than Americans' opinion about unions. As the Gallup Poll data shown here indicate, approval of unions has slipped about 20 points since their heyday, but in the 2000s Americans have been about twice as likely to approve than disapprove. Perhaps there is something in our politics, as some analysts suggest, that have given employers excessive clout in setting the rules.
Open and Closed
I want to add another consideration: It may not be American individualism that resists unionization, but American voluntarism (as discussed in Made in America). Unions face critical "free-rider" problems if membership is totally voluntary. For example, I could benefit from the union's effort to improve working conditions at my workplace without paying dues...
To be effective, however, unions usually need some way to enforce or strongly encourage membership and loyalty. The classic mechanism is the "closed" or "union" shop... "Right-to-Work" laws in about half the states make such union-employer contracts illegal... In Europe, as I noted, there are many incentives to encourage or require union membership. ...
Americans have been celebrated for centuries as joiners of voluntary associations. But that may be the kicker: the associations must be voluntary associations... Perhaps, then, Americans are fine with unions – as voluntary associations like churches or social clubs – but reject compulsory ones. And it may be that unions cannot be really effective if the door to come and go is really open. ...
Going back to the graph above, perhaps the great surge in unionization during the middle of the 20th century was Americans' emergency response to economic collapse – a deviation from their typical practice. Then they started returning to the cultural norm, an insistence on voluntariness. The current economic crisis has not been deep enough – or perhaps not sufficiently exploited – to spur another surge of counter-cultural unionization.

I am happy to stick with the explanation that "our politics ... have given employers excessive clout in setting the rules." But if I were to go down the path the author takes, I think I would attribute it more to our desire for equal opportunity and fairness than our "celebrated" characteristic "as joiners of voluntary associations."

Update: Also, I meant to ask: What caused the sudden decline in support for unions in mid 2000s? Disapproval jumped from around 30% to 45%, then fell back to 41%, and approval fell similarly.

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