Commentary | Budget, Taxes, and Public Investment

The role of government in hard times

A team of EPI economists and policy analysts met with state lawmakers and advocacy groups last week at the annual conference of the Economic Analysis and Research Network (EARN) to discuss the state of the economy, the manufacturing sector, labor unions, and the overall labor market and to outline policy priorities to create jobs and promote prosperity.

EARN, a network of state and local research and advocacy groups coordinated by EPI, gathered in Detroit, whose citywide unemployment rate of 28.9% has made it a symbol of the massive number of jobs lost during the recession and the long road many of the hardest-hit regions will face on the way to recovery.

Nonetheless, policy makers stressed that it was no time to back down on efforts to improve worker pay, family benefits, and strengthen unions. They noted that U.S. workers first won the right to organize during the Great Depression, and that the current economic downturn had helped highlight the problems of job loss and job insecurity, presenting a unique opportunity to work for change. “These are not things that have to wait until after the recession,” Doug Hall, director of EARN, said during a presentation about building a progressive agenda during a recession. “It is a unique time and I fear that the door is closing.” Hall moderated a panel discussing progressive policy options.

This year, EARN collaborated with the Progressive States Network, a group of state legislators committed to advancing policies that improve the well-being of working families. EARN groups met with lawmakers from their states and discussed opportunities to advance progressive public policies.

A dominant theme along those lines was the need for better policies for families at work, including sick leave and expanded rights for workers, such as domestic workers, who often existed beneath the radar. A number of policy makers highlighted the lack of sick leave, which made it impossible for many workers to follow the public health recommendation of staying home when they had the flu or other contagious illnesses. They also noted that the widespread lack of paid maternity leave had prompted many women who had jobs to go on welfare after giving birth. At a time when the nation is trying to limit the spread of the H1N1 flu, Ellen Bravo of the consortium, Family Values @ Work said, “The recession is making it more likely that people will go to work sick…. It isn’t just about losing your job. It’s about losing a day’s pay.”

Other policy makers stressed the need to lay the groundwork in good times and bad for future economic growth and stability. Scott Paul of the Alliance for American Manufacturing argued that if California had been able to keep its share of U.S. manufacturing jobs over the past decade, its budget would be in balance today.

Amid these discussions, EPI economists helped lay a national framework for many of the progressive policies being promoted at the state and local level. EPI President Lawrence Mishel, who participated on a panel discussing the economic impacts of the Recovery Act, stressed that, despite the country’s high unemployment rate, stimulus investments had created new jobs and saved other jobs. The challenge for policy makers, he said, was to show that the Recovery Act had already had a positive impact while at the same time advocate for the best uses of the funds. EPI Vice President Ross Eisenbrey outlined a set of retirement policy objectives, including ensuring that all U.S. workers are covered by a retirement plan that provides secure and adequate income after retirement. Those same principles are outlined in more detail in EPI’s Retirement USA project. The Detroit News highlighted Retirement USA in a story that discussed the shortcomings of the existing system, in which little more than half of all workers qualify for a 401(k) or a similar defined-contribution retirement account.

Also speaking at the EARN conference, EPI economist Heidi Shierholz offered a sobering picture of how poor the job market could remain for years to come. Although it is impossible to predict how quickly jobs will come back after the recession, Shierholz stressed that even under the best-case scenario, the unemployment rate would probably not peak until next year, and would not drop below 5% for at least five years. Economist Josh Bivens took part in a panel on the federal deficit, and offered context on the country’s federal deficit, estimated to reach $1.6 trillion this year. “The deficit is nowhere near too big,” Bivens stressed. He outlined how deficit spending during a recession had many benefits and explained why, contrary to what is often reported, the deficit was not likely to lead to a spike in interest rates or inflation, or a collapse of the dollar.

EPI’s Director of Health Policy Research Elise Gould hosted a workshop on the state of health insurance and the politics of reform. She outlined the components of an ideal reform proposal, which she said should include a strong national insurance exchange with subsidies for low- and middle-income families, a robust national public insurance option, and a requirement for employers to offer coverage or provide a meaningful contribution to the national exchange.