In early January, a rising unemployment rate convinced many skeptics that the U.S. economy was indeed dipping into recession, as EPI economists had been warning for months. Since then, the slumping economy has dominated the daily news and prompted uncharacteristically speedy action from Congress. EPI has been a key player in the discussions.
- On January 8—just days after the alarming jobs report—EPI President Larry Mishel crafted a set of guidelines for an effective economic stimulus package. He listed five essential criteria: The package should generate growth and jobs; it should take effect quickly; it should raise current deficits but not affect the long-term budget outlook; it should target unmet needs; and it should be fair.
- Building on those criteria, EPI economists issued a Briefing Paper providing a comprehensive stimulus proposal on January 11. The Strategy for an Economic Rebound called for payments to low- and middle-income workers, aid to cash-strapped states, and spending on repairs and maintenance of schools, bridges, and other public infrastructure. The plan set minimum spending for an effective package at $140 billion, or 1% of GDP, far more than what was being discussed at the time. EPI estimated the package would generate 1.2 million to 1.7 million jobs. The approach was widely circulated and picked up in numerous media outlets, including the Wall Street Journal, Reuters, Fortune, the Chicago Tribune, and Marketplace radio.
- EPI Vice President Ross Eisenbrey on January 12th strengthened the argument to include school repairs in any stimulus package. He compiled a list of school districts in dire need of maintenance and improvements, such as new roofs or updated heating systems. The Los Angeles school district leads the way with needs of about $5 billion in immediate repairs and maintenance, followed by New York City schools, which are down about $1.7 billion. The National Center for Education Statistics put the total deferred maintenance costs for U.S. schools at $127 billion.
- On January 15, Eisenbrey drafted a letter to Congress highlighting the need for an extension of unemployment insurance benefits in any stimulus package. The letter was signed by union leaders and the directors of progressive groups such as the Leadership Conference on Civil Rights, the National Employment Law Project, and the National Women’s Law Center.
- On January 16, Mishel was among three economists to testify to the Joint Economic Committee on the best response to the economic crisis. Mishel’s testimony[PDF] urged the House to choose the most cost-effective tactics, such as extending unemployment benefits and funding infrastructure repairs, and reject the ineffective tax cuts proposed by the Bush administration.
- In a guest commentary for the AFL-CIO Web site, Mishel offered his prescription for an effective stimulus. The bottom line: It’s about creating jobs.
- EPI senior economist Jared Bernstein kept the blogosphere humming with posts on the looming recession and the purpose of a stimulus. He led the charge on January 4, the day of the dismal jobs report, with a recession warning on TPM Café. Three days later, Bernstein explained the principles of economic stimulus. He went on to tell readers why recessions suck, then kept them on top of rapidly moving developments (here, here, and here).
- Bernstein also confirmed what many workers have been seeing in their paychecks in this Issue Brief, which shows a decline in hourly and weekly earnings, after adjusting for inflation.
- Algernon Austin, who joined EPI this month to direct a program on race and ethnicity, took a different slice of recession news by examining in a new EPI Issue Brief how the slump will disproportionately impact African Americans, who are already in what he calls a “permanent recession.”
- On January 23rd, EPI underscored the power of a simple graphic with a chart showing who would benefit from the Bush administration’s stimulus proposal, and why it would not reach the right people.
- The morning of January 24th, House Democrats and the Bush administration announced a stimulus deal with much fanfare, but many economists were disappointed that it included limited rebates to workers and hefty tax breaks to business. Within hours, EPI’s Lawrence Mishel issued a statement lamenting the lack of spending for unemployment benefits and infrastructure improvements. That afternoon, Mishel, Bernstein, and Research and Policy Director John Irons laid out their concerns—and their hope that the Senate could improve the package—in a conference call with reporters.
- The same day, Mishel and Nancy Cleeland (a former Los Angeles Times reporter who recently joined EPI’s staff) co-authored a blog post that was prominently featured on the Huffington Post lambasting the deal.
All of EPI’s material on its Strategy for an Economic Rebound can be found online.
Laying the groundwork
EPI experts had been preparing congressional leaders for fast action on a stimulus package since September, when they became convinced that a recession was likely. Communications with key members of the House and top presidential contenders who had expressed interest in EPI’s work prompted all to issue economic statements in the fall. EPI also sounded the alarm to progressive organizations at the biweekly Tuesday morning meetings of progressive groups. In early December, Mishel and two EPI research associates—Bill Spriggs and Jane D’Arista—were among five economists invited to discuss the housing crisis and possible downturn with 15 top Democratic leaders, drawn together by Nancy Pelosi and Barney Frank. “We stirred the nest, and Pelosi and Frank quickly responded. They decided to do something right away,” said Mishel.
Other EPI developments
Although talk of recession and economic stimulus dominated the month of January, EPI researchers continued to turn out timely and important work on other matters:
- Policy analyst Monique Morrissey dug up some startling statistics that should give pause to those pushing for a higher Social Security retirement age. In this EPI Snapshot, she showed that the well-documented increase in working age is related to economic standing: Wealthy Americans are indeed working longer, but those at lower income levels, who may have more physically demanding jobs, are not.
- Tony Avirgan of EPI’s Global Policy Network on January 10 organized a full-day conference on the African Growth and Opportunity Act (AGOA). (Reports and audio of the conference are available here.) Research presented revealed that the trade agreement has created jobs, but the majority pay poverty wages and are vulnerable to off-shoring. The conference was picked up by international media, including the Inter Press Service, which reported on “a lack of adequate protections for workers.”
- Research associate Ron Hira argued in a cover story for InformationWeek, a widely-read trade publication, that there is no IT talent shortage.
Seen and heard in the media
Charlie Rose Show: Interviewed on January 18, Mishel explains why a stimulus package is needed, “I think we should recognize that this is a broken economy for most people and has been. And we really need to address the problems that are in front of us.”
Newsweek: On Jan 12, Bernstein likens a stimulus package to insurance. “The important part is to prevent a bad situation from getting worse.”
World News With Charles Gibson, ABC: Jared Bernstein describes the stimulus deal announced January 24 by House Democrats and the Bush administration. “It’s a political choice, and a bad one. It’s an ideology that says, ‘I can get a lot more credit for tax cuts than I can for expanding unemployment insurance.’”
Yahoo Canada: Lawrence Mishel laments the missing pieces of the January 24 package. “We could create millions of jobs by rebuilding and repairing public schools, bridges, and highways.”
Mother Jones: Mishel calls the roughly $50 billion in aid for businesses “scandalous,” saying, “It is common sense and established economics that businesses invest and hire when they have customers—not when they get subsidies for equipment to make things they can’t sell.”
La Opinion (Los Angeles’ Spanish-language newspaper): Mishel’s words are translated. “Resulta escandaloso lanzar 50,000 millones de dólares a los negocios por inversiones que ya han hecho, cuando el sentido común y los principios económicos indican que los empresarios invierten y contratan cuando tienen clientes, no subsidios para equipo con el que fabricar cosas que no pueden vender.”
McClatchy-Tribune Information Services: John Irons says that, although the House deal is far from perfect, it’s an improvement over the Bush plan. “Not only is it more fair, but it’s a more effective stimulus.”
The Nation: Josh Bivens compares the statements of Democratic candidates on the mortgage lending mess. “Obama has been less engaged on the role of financial institutions in failing subprime mortgages, while Clinton and Edwards have called for greater regulation.”
New York Times: EPI numbers on the gap between wage and productivity growth make for an eye-opening chart for a January 16 story on the glum mood of the economy.
Globe and Mail: On January 5, Jared Bernstein says jobs numbers show the economy is already punishing workers. “A jump of this magnitude has historically been either a symptom or a harbinger of recession. At this point, we can put aside the question as to when the overall economic headwinds will reach the labor market. They’re here.”