The intense debate this year over the effects of regulatory efforts on jobs and the economy, driven (inaccurately) from the start by the mantra of “job-killing” regulations, has become even more heated in recent weeks. Anti-regulatory efforts have passed the House, been proposed in the Senate, and been embraced by Republican presidential candidates. EPI has issued a series of reports on this topic this year, including reports which underscore three key points.

A huge shortfall in demand, not regulatory uncertainty, is what ails the economy

EPI President Lawrence Mishel goes through the evidence in Regulatory uncertainty: A phony explanation for our jobs problem, published in September. He finds that while data depicting a lack of demand are clear (even using conservative assumptions, per capita demand is “8.5 percent lower than we would expect” at this point in the recovery), data suggesting a significant role for regulatory uncertainty are altogether absent. Investment and employment trends are in line with, or by some comparisons more favorable than, trends in other recent recoveries. In this recovery, investment in equipment and software has grown faster than during the previous three recoveries, and private sector employment has grown much faster than during the last recovery. There are no mysterious lags that might be explained by regulatory uncertainty.

Further, the lack of demand means companies already have at their fingertips substantial resources that they do not have to use; presumably, they would use these resources before they would increase investment or hiring, and substantial unused capacity (not regulatory uncertainty) explains why job growth has not been faster. Companies are not fully using their capital stock; Josh Bivens’ October post on EPI’s Working Economics blog, “The bad economy is not just a state of mind,” finds that the capacity utilization rate (the degree to which current factories and equipment are being used) is still well below its average from 1979 to 2007. Similarly, companies are not fully utilizing their current employees, with the average number of hours employed individuals are working each week still below the pre-recession level.

In his September report, Mishel also reviews a range of surveys of businesses on their perceived regulatory burden. The survey results from the leading small business association (National Federation of Independent Business) are also inconsistent with the story that regulations are now the main or a new factor holding back the economy and job creation. Summarizing the results from nine presidential terms, he finds that during the Obama administration the percent of small businesses reporting that regulations are the single most important problem they face has been within its historical range; for instance, the proportion reporting this concern is lower than it was during the Clinton years, when employment growth was rapid. What is unusual now is that the most common problem cited by far is “poor sales” (an indicator of the lack of demand); during the Obama administration, the average share of small businesses citing “poor sales” as the most important problem they face is more than double the average cited during any other presidential term examined.

Mishel’s paper has prompted several exchanges with those who claim a damaging role for regulatory uncertainty; see his Working Economics blog posts “Clive, don’t change the subject,” “Really, that’s all you got?” and “Regulatory uncertainty not to blame for our jobs problem.” My blog post, “Business economists differ from House orthodoxy on regulation, uncertainty, and tax hikes,” reports that 80 percent of business economists think the current regulatory environment is good for the economy and businesses.

New EPA regulations, in particular, can be expected to have a negligible effect on the overall economy. The largest EPA regulation proposed so far (the ‘air toxics’ rule) would, in fact, likely create a modest number of jobs

Perhaps no regulatory agency has been criticized more this year than the Environmental Protection Agency; hearing after hearing, now followed by bill after bill and Republican presidential candidate after Republican presidential candidate, have targeted EPA on the grounds that its rules are damaging the economy and employment. To investigate this claim, my September report The combined effect of the Obama EPA rules and a companion blog post, “EPA and the economy: Much ado about 0.1 percent,” tallies the compliance costs of all the major EPA rules that have either been finalized or proposed during the Obama administration.

The results are striking. Not only would the benefits of these rules dramatically outweigh their costs, with tens of thousands of lives saved and even more serious illnesses prevented, their total compliance costs are negligible relative to the size of the economy. Once the rules are fully in effect, the compliance costs would amount to only about 0.1 percent of gross national product. This is an amount that the overall economy can absorb without great difficulty, especially since implementation of the new rules can take several years or more and since the figure does not take into account the frequently considerable offsetting economic benefits, such as fuel savings for consumers from new fuel mileage standards or increased work days because diminished pollution means adults are healthier (see my November blog post, “Economic benefits from two fuel standard rules alone offset much of modest compliance cost of all Obama EPA rules.”

Individual EPA rules have also been criticized on the grounds that they will eliminate large numbers of jobs; these claims do not hold up to scrutiny. In A lifesaver, not a job killer:  EPA’s proposed ‘air toxics rule’ is no threat to job growth, Bivens conducts a comprehensive analysis of the proposed EPA rule that has the largest compliance costs, the proposed “air toxics” rule. He concludes that the “jobs-impact of the rule will be modest, but it will be positive,” with a central estimate that the rule will create 92,000 jobs. The gain reflects the fact that compliance expenditures create jobs when the economy has large numbers of unemployed workers, and the jobs gained outweigh any jobs that might be lost due to the modest increase in energy prices produced by the rule. The broader point about the positive effects of compliance expenditures when there are substantial numbers of workers sidelined has been made by others as well, as Bivens blogged in “Famous economists agreeing with us—the first in an occasional series.”

Academic studies of and data on the relationship between employment and regulations generally find that regulations have a modestly positive or neutral effect on employment

This spring, EPI Research and Policy Director John Irons and I completed a comprehensive review of the academic and other research on the relationship between regulation, the economy, and jobs (see Regulation, employment, and the economy:  Fears of job loss are overblown). Our examination of studies of economy-wide effects of regulations finds that:

The most common general studies are of environmental regulations, and these have consistently failed to find significant negative employment effects. Moreover, studies suggesting that regulations have broad negative effects on the economy offer little persuasive evidence.

We also examine studies of the effects of particular regulations on particular industries, finding that:

A surprising number of such studies actually show that regulations have a small positive net effect on employment; these include studies of environmental regulations on industries generating significant pollution. Some well-executed studies have found that certain regulations led to job losses in particular areas, but most studies of various industries suggest that regulations had either a close to neutral or small positive effect on employment levels.”

Our report also analyzes the federal government survey of employers’ reasons for “extended mass layoffs” of their workers. Only a tiny fraction of these layoffs are due to regulation, according to the employers themselves. In October, Bruce Bartlett wrote about this same data in his Economix blog “Misrepresentations, Regulations, and Jobs.” He notes that only 0.2 percent of such layoffs are due to regulation, and that, “Lack of demand for business products and services is vastly more important.”

Our report also underscores how the narrative that regulations thwart job creation is not only inaccurate, but is fundamentally incomplete. Such a frame not only ignores the benefits of the regulations, it also fails to consider how fundamental certain sensible regulations are to the functioning of local economies (extraordinarily lax regulation of oil drilling in the Gulf of Mexico meant that an accident such as the BP oil spill was inevitable, according to the commission set up to investigate the spill) and to particular industries (in 2010 the Food Safety Modernization Act was adopted with widespread support from the food industry, which believed the regulatory and safety improvements in the bill would boost consumer confidence in the industry’s products).

Further, certain sensible regulations are essential to the national economy, and thereby to a healthy national labor market. As discussed in our report and elsewhere, the financial collapse that led to the Great Recession and the loss of eight million jobs came in the wake of deregulation of financial markets and of regulatory failure. Our report, for instance, quotes 2008 congressional testimony from Christopher Cox, then the director of the Securities and Exchange Commission and prior to that a leading Republican member of Congress: “We have learned that voluntary regulation does not work… The lessons of the credit crisis all point to the need for strong and effective regulation.”

It is unfortunate that those lessons are often forgotten today.

The latest example is a proposal developed by Senate Democrats to re-authorize the Elementary and Secondary Education Act (known recently as “No Child Left Behind,” or NCLB). Democratic Senator Tom Harkin of Iowa, chairman of the Senate education committee, has drafted a bill that will relieve states of having to meet federally specified achievement goals in math and reading. Instead of requiring all students to be “proficient” in these basic skills by 2014 (as NCLB demands), or to be “college ready” by 2020 (as the Obama administration proposes), the Harkin bill will require only that schools show “continuous improvement” for all students, and for students from low-income families, those who don’t speak English, minority students, and students with disabilities (see page 52 of the draft bill).

According to a report in Education Week, “state and local officials likely will be exchanging high-fives, since that would give them much of the flexibility they’re looking for.”

They are in for a shock. “Continuous improvement” is no more reasonable or achievable than “proficiency for all,” or universal college readiness.

Of course, citizens should expect every public school to strive for its peak level of performance, but some schools have much farther to go to reach this level than others. Unlike present policy, a well-designed accountability system could judge how far each school can and should go, and whether it is on the right track to get there for the several populations it may serve. In each case, this is a difficult judgment to make, and a slogan is no substitute. In this regard, a single one-size-fits-all metric such as “continuous improvement” is no better than “proficiency for all.” The Broader, Bolder, Approach to Education campaign has described the outlines of a more reasonable accountability system, and a book, Grading Education, goes into more detail.

NCLB’s attempt to require all students to be proficient at a challenging level led to the absurd result that nearly every school in the nation was on a path to be deemed failing by the 2014 deadline. The demand ignored an obvious reality of human nature – there is a distribution of ability among children regardless of background, and no single standard can be challenging for children at all points in that distribution.

Expecting all children to be college-ready suffers from the same problem, and more. In a nation where 32 percent of all young adults now earn bachelor’s degrees, and where the Bureau of Labor Statistics projects that only 30 percent of job openings by 2018, even in a healthy economy, would require a bachelor’s degree or more, the notion that 100 percent of students would be able to succeed in an academic college by 2020 is even more fanciful.

So why not “continuous improvement” instead? It’s a nice slogan, borrowed from a management fad promoted by W. Edwards Deming and others who thought this was the key to Japanese auto manufacturing success. But while consistent attention to small improvements makes sense as a management tool, no company has ever continuously improved, overall, indefinitely. There are spurts of improvement, and plateaus, and then the most successful companies fade, to be overtaken by others. No management expert would recommend that firms be dismantled if they are consistently profitable, but just not more profitable year after year after year.

But continuous improvement will now, if Senate Democrats have their way, be the trajectory for every school in the country, by law.

Today, some students and schools already perform at their peak capacities. Many high-performing students and schools should be praised for maintaining high levels of performance, not condemned for not improving further. Imagine a parent with two children of high natural ability, one of whom is an “A” and the other a “C” student – should the parent have equal expectations of both for improvement? I’m certain that Sen. Harkin and his staff have not made a study of schools and students nationwide to determine that there nowhere exist schools for which maintenance of quality, rather than improvement, should be our expectation. If there are such schools, they will be the first to be labeled failing under a continuous improvement standard.

More importantly, many “C”-performing schools and students are now achieving at their peak capacities, in view of the external constraints over which public education has no control. Many disadvantaged students, and schools serving them, are low-performing not because of inadequate school efforts, but because children come to school unable to focus because they are hungry or suffer from untreated minor illnesses such as asthma or tooth decay, or with inadequate early childhood literacy preparation because their parents are poorly educated, or with interrupted instruction because of homelessness or displacement from housing instability, or stressed because of parental unemployment shocks, home foreclosure, or neighborhood crime.

It is easy for Senators to issue fiats that schools serving such children should “continuously improve” their math and reading test scores, but many of these schools are already performing gargantuan feats, given their social and economic contexts. Indeed, many (not all) schools with low test scores serving disadvantaged children are having more positive impacts on their students than typical “high-performing” schools serving affluent children who would test well even with the poorest instruction. A congressional proposal that both types of schools should “continuously improve” is based on no empirical examination of what is possible in different types of schools, and how what is possible might vary.

A new Russell Sage Foundation book edited by economists Greg Duncan and Richard Murnane, Whither Opportunity? Rising Inequality, Schools and Children’s Life Chances, notes that growing income inequality in America has been accompanied by a widening gap between the achievement of students from rich and poor families. In a Chicago Tribune op-ed, Duncan and Murnane explain why they (and one of their co-authors, Stanford economist Sean Reardon) think this has occurred:

Growing economic inequality contributes in a multitude of ways to a widening gulf between the educational outcomes of rich and poor children. In the early 1970s, the gap between what parents in the top and bottom quintiles spent on enrichment activities such as music lessons, travel and summer camps was approximately $2,700 per year (in 2008 dollars). By 2005-2006, the difference had increased to $7,500. Between birth and age 6, children from high-income families spend an average of 1,300 more hours than children from low-income families in “novel” places — other than at home or school, or in the care of another parent or a day care facility. This matters, because when children are asked to read science and social studies texts in the upper elementary school grades, background knowledge is critical to comprehension and academic success.

With unemployment now stuck at unacceptably high levels, especially for the parents of minority children, the ranks of students without family-provided enrichment activities can only grow, and the isolation and concentration of such students in schools serving peers without such activities can also only grow. National legislative demands that schools show “continuous improvement,” without any amelioration of the economic hardship faced by parents, would be laughable were it not so tragic.

And then there are the reductions in resources available to schools, a result both of the faltering economy and Republican attacks in many states on public education. Last month alone, 24,000 jobs were eliminated from public schools. Heidi Shierholz of the Economic Policy Institute has calculated that since the recession began in Dec. 2007, nearly 278,000 public school jobs have been eliminated; another 48,000 necessary to keep up with growing enrollment were not created, for a total loss of educators and other public school workers of 326,000. Such reductions will continue until the economy stabilizes.

Some who are hostile to public education cheer this development, seeing it as the shedding of inefficiency. But I’d guess that the Senate Democrats who are drafting the ESEA re-authorization are not among them. Sen. Harkin and his colleagues probably think that counselors, reading specialists, librarians, classroom aides, parent coordinators and teachers whose jobs are being cut make a positive contribution to student achievement. Yet if so, how can Senate Democrats demand that student achievement show “continuous improvement” when these Senators can do nothing to prevent the resources on which that improvement depends from being eliminated?

Some schools, of course, should improve, and dramatically so. Some schools serving low-income students and some schools serving affluent students operate at far below their potential. But those that are doing as much as we should expect cannot be distinguished from those that are doing far less, simply by looking at student test scores or how those scores grow or don’t grow over time. Making such distinctions requires holistic evaluation of school curriculum, leadership, and teacher quality that is expensive, requires trained experts, and is nested in broader community social and economic contexts. States now have no resources or capacity to implement such accountability systems, and proposals for a new Elementary and Secondary Education Act are noticeably silent when it comes to addressing this shortcoming.

If ESEA is re-authorized with a simple requirement that all schools and students show “continuous improvement,” we’ll be back for the next re-authorization in five years with new demands for wholesale waivers from Congressional expectations that had no basis in reality.

The DOL’s final rule would establish a new wage methodology for determining what H-2B guestworkers should be paid. U.S. law and regulation require that H-2B workers only be authorized to enter and work in the United States “if unemployed persons capable of performing such service or labor cannot be found in this country,” and if the H-2B worker’s employment will not be “displacing qualified United States workers” or “adversely affecting the wages and working conditions of United States workers.” This new rule, if implemented and enforced, is a giant leap forward for workers and will go a long way toward improving the lives of the immigrants and Americans who work in the main industries that hire H-2Bs.

In order to prevent adverse effects on wages and working conditions, employers must first certify that there are no available U.S. workers willing and able to take a position before hiring an H-2B worker. Next, the DOL must use a formula to set and approve the appropriate “prevailing” wage the H-2B worker must be paid. If the prevailing wage is set too low for incoming foreign H-2B workers, it will create downward pressure on the wages of all workers in the same occupation, because local workers will be forced to compete with H-2B workers earning less than the average. In other words, setting wages too low will create an adverse effect on the wages of U.S. workers.

The George W. Bush administration put into place a wage methodology that allows the prevailing wage to be set at a rate lower than the average wage for a specific occupation in a particular region. As EPI found in 2008, employers take advantage of this legal loophole—which resulted in almost all H-2B wage certifications being set at a level that was lower than the average wage paid to all workers. Thanks to the work of some good lawyers advocating on behalf of immigrant and U.S. workers, a federal court in Pennsylvania found the Bush rule to be invalid, which led to the DOL’s recent creation of the new rule’s improved wage methodology.

The new rule simply requires that if a Davis Bacon Act (DBA) or Service Contract Act (SCA) wage exists for the occupation and region, or if a collective bargaining agreement (CBA) covers the position, then the wage in those acts or agreements must be used as the prevailing wage. But if none of these exist (which will be true in many cases), then the average wage of all workers in that occupation and local region where the H-2B worker will be employed shall establish the prevailing wage.

It must be noted that the new Obama wage rule is much more worker-friendly and a vast improvement over the Bush rule. Although I have previously argued and listed ways the new rule could be strengthened to better protect immigrant and American workers, the DOL and the Obama administration deserve to be praised for adopting it.

The chart below lists the hourly wage data for two occupational categories: “Meat, Poultry, and Fish Cutters and Trimmers,” which includes crab pickers (i.e., workers who literally pick the meat out of a crab, like this), and landscape workers. The chart shows the difference between the hourly rate that H-2B crab pickers and landscapers are currently being paid in Maryland under the old (and still current) rule, and the average for all workers in the given occupation, which is what workers should be paid in order to prevent wages from being depressed for U.S. workers. H-2B crab pickers and landscapers are underpaid by $4.82 and $3.35 per hour, respectively.

Click figure to enlarge

The chart illustrates that employers have been using the H-2B program as a way to degrade the wages of U.S. workers. They have been getting away with paying the federal minimum wage ($7.25) to crab pickers in Maryland, when the statewide average in this industry is $12.07 per hour.

Another way to look at this is that a crab picker earning the state average will earn $25,106 over the course of a year, which is above the poverty line for a family of four ($22,113). But current H-2B crab pickers only earn $15,080 a year, which is about $7,000 below the poverty line. For landscapers in Maryland, the results are similar—in both cases the increase in hourly wage will literally lift the H-2B worker out of poverty.

Employers are essentially saving around $10,000 per employee, making it clear why an employer would rather hire an H-2B worker from abroad instead of a local U.S. worker. When you add to this the fact that many H-2Bs arrive to the U.S. deeply in debt because of travel expenses and fees paid to foreign labor recruiters to secure their job, it also becomes clear that H-2B workers are unlikely to complain about low wages and dangerous or unsafe working conditions (for example, see this report on the crab picking industry); these immigrant workers are desperate to earn back what they have invested, and are not allowed to switch jobs if they feel they have been abused or treated unfairly by their employer. They also know that if they are fired, they become instantly deportable.

On the macro level, the employers’ strategy to keep wages low in H-2B industries has also been successful. In 2008, research by former EPI economist Jared Bernstein showed that between 2000 and 2007, wages in six of seven common H-2B occupations either declined or remained stagnant, and unemployment rates either rose or stayed the same (the sole exception was in “extraction” occupations, due to a boom in mining). Keep in mind, this is before the Great Recession began—the situation is likely to have worsened across the board. In any case, the data in the table below are clear indicators that labor shortages do not exist in H-2B occupations, despite the fact that H-2B employers continue to claim that they can’t find enough Americans who are willing to pick crab, work in hotels, or mow lawns.

Click table to enlarge

If employers truly can’t find U.S. workers for these jobs, then there may be a good economic reason. Because employers can pay H-2B workers less than the average in the occupation and region, local workers already in the United States are discouraged from even applying for jobs with employers that hire H-2Bs because they are offered at wages that are far too low, and for jobs that are too difficult to make them worth doing for the wage on offer (and because they know that employers often discriminate in favor of hiring H-2B workers). It’s not a big surprise that employers can’t find enough workers willing to earn the minimum wage to pick crabmeat all day by hand, or to earn less than $20,000 a year to be outside all day cutting grass and trimming hedges in the extreme heat and humidity of the East Coast. But with a national unemployment rate of 9.1 percent, an underemployment rate of 16.2 percent, and 4.3 workers available for every job opening, if you offered 3-5 dollars more per hour to do these jobs—thereby turning a poverty level job into one that offers a living wage—a lot more local workers would apply.

Recent media reports have referenced two studies conducted on the economic impacts of H-2B workers in Maryland and Virginia, and statements from those opposed to the new wage rule have pointed to them in order to support their claims that H-2B workers are vital to local industries (for example, see here, here and here). The Maryland study was conducted by the Maryland Sea Grant Extension Program at the University of Maryland, and the Virginia study is from the Virginia Institute of Marine Science (the latter is unavailable online). The Maryland study estimates that the crab industry would lose $9.5 million in revenues and that “the loss of approximately 376 H-2B visa workers in Maryland’s crabmeat processing industry would lead to the loss of 955 domestic jobs throughout the Maryland economy.” The other study estimates that “Virginia would experience a $176.8 million reduction in economic activity in the processing and wholesaling sector,” and that “the loss of the H-2B workers in this sector is estimated to create an overall loss of domestic employment in Virginia of 2,672.”

That is scary data, indeed. Nobody wants to lose any jobs or economic productivity in these states, but there is a fatal flaw inherent in both these studies that render the final estimates unreliable. The Maryland study assumes for their analysis that “H-2B workers cannot be replaced by domestic workers,” and the Virginia study also assumes “that the loss of these temporary [H-2B] workers will not be mitigated by replacement from the domestic labor pool.” In other words, these studies assume that employers will not be able to attract any local workers to fill the jobs normally held by H-2B workers. Perhaps they make this assumption because wages for H-2B workers are able to be set so low. Again, if wages were to be increased to the market rate—in other words, the average paid to all workers in these industries in local areas in Maryland or Virginia—then U.S. workers would surely vie for these jobs. Are these jobs so unattractive that workers in Dorchester and Somerset counties in Maryland (where the 2010 unemployment rate was 10.7 and 10.4 percent, respectively) would not be willing to do them for 9, 10 or 12 dollars an hour? H-2B employers don’t want to try offering their jobs to unemployed Americans at these wages, though, because they have gotten accustomed to underpaying their foreign workers.

Unsurprisingly, employers who enjoy the benefits of paying less than average wages and having workers indentured to them are fuming about the wage increase, and claiming that they cannot afford to pay a few more dollars an hour for those they hire. As a result, the crab/seafood processing, forestry, amusement, hotel, sugar cane, and landscaping industries are doing everything they can to kill the rule by starting up a “defense fund,” appealing to Senators and Representatives on both sides of the aisle, and by filing similar complaints in federal courts in Florida and Louisiana.

Because of the ongoing cases, the DOL has been forced to postpone the rule for 60 days. But where are the voices speaking up to defend this rule, and advocating for immigrant workers and unemployed Americans? Perhaps among Democrats?

Sadly, no. In fact, quite the opposite. Senator Mikulski, normally a labor-friendly Democrat, has been on a rampage against the DOL’s new H-2B wage rule, claiming that raising wages for H-2B and American workers will destroy the crab industry in her state. She circulated a sign-on letter among members of Congress, addressed to Labor Secretary Hilda Solis, asking her to “rescind and revise” the wage rule. Mikulski then teamed up with Democratic Senator Mary Landrieu from Louisiana, co-sponsoring an amendment to an appropriations bill that would prohibit the use of any funds to enforce the rule (the amendment passed, but due to usual gridlock in Congress, the future of the main bill is uncertain). Democrats in Virginia have also joined the fight to keep wages low for workers: Senator Mark Warner and former governor Tim Kaine (who is currently running for the U.S. Senate) have both spoken out against the rule, claiming the required wage increases will lead to a loss of jobs in their state.

These Senators are accepting at face value the claims from businesses that they cannot afford to pay a living wage to either the H-2B workers they solicit from abroad or the unemployed American workers who live near them. H-2B employers insist on paying poverty level wages for jobs which, although they may not require any formal education or more than a week’s worth of training, are nevertheless difficult, grueling and dangerous—and often don’t come with health benefits. The Labor Department’s new wage rule for H-2B workers would simply require businesses to play fair, by paying wages similar to what other employers are already paying (i.e., the current market rate), instead of allowing them to use immigration policy as a way to import poverty to the United States while increasing profits for themselves.  All of this comes at the expense of wages and living standards for immigrant and American workers. The Democratic Senators should reconsider their position, and defend the Labor Department’s H-2B wage rule and the American and immigrant workers it seeks to protect.

Progressive tax modernization can and should raise significant revenue to finance job creation and public investments, shrink deficits, and ease pressure elsewhere in the budget. It can moderate recent and persistent trends toward widening income inequality and hyper-concentration of wealth, helping to restore a society of shared prosperity. Progressive taxation is a palatable approach to deficit reduction embraced by the public—unlike nearly every other deficit reduction approach. Simply put, progressive taxation is fiscally responsible, economically sensible, and politically viable.

President Obama proposed that Congress reform the tax code while raising $1.5 trillion in new revenue over the next decade. The president also outlined principles for tax reform, including the “Buffet Rule” that middle class Americans shouldn’t be paying a higher tax rate than some millionaires.

Looking to millionaires, and to high-income households generally, for more revenues is an appropriate response given recent trends in income and tax policy (see the EPI Issue Brief “The facts support raising revenues from the highest-income households” for a full discussion). At 17.4%, Warren Buffet’s average tax rate is equal to the average rate for households with earnings between $50,000 and $75,000 in 2007, indicating that his average rate is less than many of these middle-income households. Average income tax rates typically peak between $1 million and $2 million in adjusted gross income, and then fall as households collect a greater share of income from capital gains and dividends, currently taxed at a 15% rate.

Buffet’s call to Washington to “stop coddling the super-rich” could be directly answered by ending the preferential tax treatment of investment income over work income. More than half the benefit of preferential capital gains treatment goes to the top tenth of one percent of households, according to the Tax Policy Center. Reinstating higher tax brackets for millionaires would also help: the income cutoff for the top marginal tax bracket for married joint filers has fallen precipitously from roughly $3 million in the early 1950s (adjusted to current dollars) to $1 million in 1970, to $379,000 today.

The president also underscored the broad principal that tax reform should produce more revenue. The tax code’s design inadequately funds today’s needs, let alone the demands of an aging population and spiraling health care costs. The president threatened to veto any deficit reduction package that does not include new revenue.

This call for balanced deficit-reduction through more tax revenues is entirely appropriate. A spending-cuts-only approach is regressive in that it forces the brunt of deficit reduction on the backs of poor and working families while ignoring a prime culprit of the budget deficit: the expensive, ineffective, and unfair Bush-era tax cuts. These top-heavy tax cuts added $2.6 trillion to the public debt over 2001-10 and will add $3.8 trillion to deficits over the next decade if fully continued. Because most of these tax cuts are assumed to continue, the president’s framework leaves revenue $2.7 trillion below the levels scheduled under current law (or $3.4 trillion if Congress also maintains a slew of business tax credits, such as the research and experimentation credit). Congress is now paying for sweeping tax cuts with deep spending cuts, including roughly $1 trillion in discretionary spending cuts enacted earlier this year.

Beyond defunding government, the Bush-era tax cuts presided over the worst post-World War II economic expansion—measured in terms of GDP, investment, employment, or wages and salaries. We cannot afford to double-down on the “cut taxes for the wealthy and the rest will benefit” economic fallacies of the last decade; the money never trickled down. Instead, those tax policies reinforced trends of ever-widening income inequality; the top 1% of earners captured 65% of all income gains during the Bush economic expansion while the top 1% also received 38% of the value of the Bush-era tax cuts in 2010, according to TPC. Because the big money has accumulated to the top sliver of earners and because regressive tax cuts are responsible for much of the budget deficit, progressive taxation should be the core of any serious deficit-reduction proposal.

The economy is not working for the middle class, as demonstrated by persistently high unemployment, falling median income, rising poverty, and decades of widening income inequality, among other indicators. In this context, it is unsurprising that voters favor progressive tax increases but overwhelmingly reject cuts to economic security programs such as Social Security, Medicare, and Medicaid.

Those doubting the viability of the president’s proposals need only look to the polls. A March 2011 NBC/Wall Street Journal poll on options for reducing the deficit found that 81% of participants endorsed a surtax on individuals earning over $1 million; this was the only option ranked “totally acceptable” by a majority of respondents. More than three out of four respondents supported eliminating tax subsidies for oil and gas industries, while two out of three supported ending the Bush tax cuts for households earning more than $250,000 a year, both steps proposed by the president’s new framework. Supply side apostate Bruce Bartlett recently compiled a litany of polls showing that deficit plans containing new revenue are favored roughly two-to-one over plans without revenue.

On the other hand, the NBC/Wall Street Journal poll found 67% of participants opposed cutting Medicaid and a resounding 76% opposed cutting any Medicare benefits. A majority also opposed replacing Medicare with a voucher. Armed with public opinion on their side, the administration and congressional Democrats must hold their line on progressive taxation and the positive role of government rather than cave to the conservatives’ “my way or the highway” attempts to dismantle the legacies of the New Deal and Great Society.

The House Republican 2012 budget embodies the spending-cuts-only approach. Medicare is turned into a voucher, thereby undermining the commitment to provide seniors with comprehensive health care, while federal Medicaid spending is halved over the next two decades. The Center on Budget and Policy Priorities estimated that roughly two-thirds of the spending cuts from this budget approach would come from programs for lower-income households, particularly Medicaid, Pell Grants, and food stamps. This approach turns the concept of “shared sacrifice” on its head and more closely fits the label of “class warfare” than the president’s proposal to collect more revenue from high-income households, who by definition are best able to contribute, and over time have seen their incomes skyrocket and taxes fall sharply.

In his recent address to the joint session of Congress, President Obama rightfully rejected any campaign to “dismantle government, refund everybody’s money, and let everyone write their own rules, and tell everyone they’re on their own.” There are worse things than paying taxes—just ask any one of the 25 million un- and underemployed Americans. There are also goods and services that the private sector will never provide or will underinvest in, such as transportation, education, clean air and water, or health insurance for seniors and the disabled. Fiscal responsibility does not require eviscerating social programs and public investments that promote economic security and generate growth. Fiscal responsibility means paying for the popular economic security programs and investments people widely value. Reforming the tax system in a progressive manner that increases revenues is an essential step toward achieving this fiscal responsibility.

The delegation’s report cites evidence of “a widespread coercive campaign” by Hershey’s subcontractors to intimidate students who organized for basic human and labor rights. It also found numerous “potential legal violations, including discrimination, forced labor, substandard conditions of work, wage theft, and infringement on associational rights.” Ultimately, the authors note that their investigation “revealed numerous credible accounts of a program gone seriously wrong.” The delegation’s report is also consistent with what EPI’s research has revealed about the J-1 program, namely that the U.S. State Department does not have adequate labor and employment protections in place for the foreign workers  who participate.

The State Department and the Department of Labor are now conducting four federal investigations looking into the events that took place at the Hershey factory. While we commend both agencies for their efforts and prompt response, the delegation’s report makes it clear that these investigations must be thorough and transparent, and the findings should be made public.

One of the delegation’s principal recommendations is that the State Department suspend CETUSA’s authority to continue sponsoring student workers and issuing J-1 visas. We strongly agree that this is an appropriate course of action, at least until the findings of the four ongoing federal investigations have been revealed. We also hope – as the delegation calls for – that all of the responsible parties will be held accountable for any legal violations that have been committed.

• To download the delegation’s full report, click here.
• For more on the J-1 Exchange Visitor program, see our recent publication, Guestworker Diplomacy.
• For more information on the National Guestworker Alliance’s Justice at Hershey’s Campaign, visit www.guestworkeralliance.org.

Originally appeared as an op-ed in the Washington Post

President Obama plans to announce a jobs package next week. For those of us angered by Washington’s recent predilection for self-inflicted economic wounds, this is very good news.

But as always, the devil is in the details. Especially in a climate where both political and popular forces are skeptical of the government’s ability to help on the jobs front, the plan needs to be crafted to resonate with the public and to get a strong bang for the buck.

That’s where FAST! comes in. Fix America’s Schools Today is a proposal — from the 21st Century School Fund, the Economic Policy Institute and the Center on Budget and Policy Priorities — to address the backlog of repairs at the nation’s 100,000 public schools. It’s an idea that efficiently marries big problems to a big solution.

One big problem is that most school districts in our country have been deferring maintenance and repairs for years. The has led to inefficient, and thus expensive, energy use, unsafe drinking water, mold, poor air quality, inadequate fire safety systems and structural dangers. With local governments hammered by the recession, school districts do not have the resources to address this backlog, nor will they for many years to come.

The other big problem is that after the housing bust, employment opportunities crashed for construction workers. So far this year, their unemployment rate has averaged 18 percent.

An efficient and common-sense solution is a government infrastructure program to put many of these workers back on the job fixing our nations’ schools.

There’s a lot to recommend FAST. First, the resources can be quickly distributed through formulas that Congress already uses. All 16,000 school districts receive funds under “Title I” programs. FAST could be set up to ensure that within a month of enactment, every state and a hundred of the local education systems with the greatest needs would get funding. Any school district with a roof to insulate and repair, for example, could begin work before the end of the year.

The rest of the districts could apply, and recipients would be chosen based on need, along with estimates of jobs created and energy savings generated.

Another reason the president should consider this his top priority for improving infrastructure and putting America back to work is that FAST is more labor-intensive than road and bridge construction. One lesson of the 2009 Recovery Act is that roadwork has become more capital-intensive. Right now, we need jobs for people, not machines. The work that FAST would enable — insulating buildings; fixing or replacing windows, roofs and HVAC systems; and implementing green measures, such as adding solar panels or wind generators — is still highly labor-intensive.

Given the depth of the backlog, FAST is scalable. Although the full cost of needed repairs is in the hundreds of billions, we propose a $50 billion program that would create about half a million jobs. To avoid adding to the deficit and to complement the energy-efficiency theme of the repairs, the cost of the program could be fully offset by closing loopholes that benefit the oil and gas industries, such as an $18 billion tax break for manufacturers that somehow goes to oil and gas extractors, too, or an $11 billion tax break on the depletion of oil or natural gas fields that extraction companies get well before depletion, and one that keeps giving even after the full costs of the properties have been deducted.

As its name suggests, FAST could quickly get to work fixing a vital but dangerously ignored American institution, while putting hundreds of thousands back to work and providing students with better learning environments.

Such an initiative also conveys an important message to our children. It’s hard for them to square the message that we, their parents, are concerned about and committed to their educational success when we send them off to schools that are in ill-repair or even unsafe.

FAST should be at the top of the president’s jobs agenda next week.

Jared Bernstein, chief economist and economic adviser to the vice president from January 2009 to May 2011, is a senior fellow at the Center on Budget and Policy Priorities. He blogs at jaredbernsteinblog.com. Mary Filardo is executive director of the 21st Century School Fund. Ross Eisenbrey is vice president of the Economic Policy Institute.

If you saw Waiting for “Superman,” Steven Brill’s tale in Class Warfare will be familiar. The founder of Court TV offers another polemic against teacher unions and a paean to self-styled “education reformers.” But even for those who follow education policy, he offers an eye-opening read that should not be missed. Where the movie evoked valiant underdogs waging an uphill battle against an ossified behemoth, Brill’s briskly written book exposes what critics of the reformers have long suspected but could never before prove: just how insular, coordinated, well-connected, and well-financed the reformers are. Class Warfare reveals their single-minded efforts to suppress any evidence that might challenge their mission to undermine the esteem in which most Americans held their public schools and teachers. These crusaders now are the establishment, as arrogant as any that preceded them.

Brill’s heroes make a high-profile gallery. They are public-school critics like former New York and Washington, D.C. schools chancellors Joel Klein and Michelle Rhee. They also include charter school operators David Levin (KIPP) and Eva Moskowitz (Harlem Success Academies), as well as alternative teacher and principal recruiters Wendy Kopp (Teach for America) and Jon Schnur (New Leaders for New Schools). Their cause was advanced by Robert Gordon at the Democratic Party’s think-tank adjunct, the Center for American Progress, before Gordon moved on to oversee education policy at the Office of Management and Budget. The reformers’ ranks boast billionaires Bill Gates and Eli Broad, U.S. Education Secretary Arne Duncan, former White House chief of staff (and now Chicago mayor) Rahm Emanuel, and President Obama himself. And they don’t lack for savvy, richly endowed representation. Democrats for Education Reform (DFER), a lobbying, political action, and communications campaign rolled into one, has brought them all together. Lavishly supported by the newfound wealth of young Wall Street hedge fund managers answerable to no one, DFER’s troops have been working overtime to radically transform American public education.

Brill’s villains are Randi Weingarten, president of the American Federation of Teachers, Stanford professor Linda Darling-Hammond (who argues that fully trained and certified teachers outperform Teach for America’s Ivy League graduates recruited to teach for two years in inner-city schools after only brief summer training), and Diane Ravitch, once an “education reformer” herself but now a turncoat whose speeches, media appearances, and 2010 book, The Death and Life of the Great American School System, attack DFER’s agenda.

The case Brill’s reformers make for their cause by now enjoys the status of conventional wisdom. Student achievement has been stagnant or declining for decades, even as money poured into public schools to improve teacher salaries, pensions, and working conditions (reducing class sizes, or hiring aides to give teachers more free time). Teachers typically have abysmally low standards, especially for minorities and other disadvantaged students, who predictably fall to the level of their teachers’ expectations. Although teachers’ quality can be estimated by the annual growth of their students’ scores on standardized tests of basic math and reading skills, teachers have not been held accountable for performance. Instead, they get lifetime job security even if students don’t learn. Brill observes a union-protected teacher in a Harlem public school bellowing “how many days in a week?,” caring little that students pay him no heed and wrestle on the floor instead.

Protecting this incompetence are teacher unions, whose contracts prevent principals from firing inadequate (and worse) teachers. The contracts also permit senior teachers to choose their schools, which further undermines principals’ authority. Union negotiations have produced perpetually rising salaries, guaranteed even to teachers who sleep through their careers. Breaking unions’ grip on public education is “the civil rights issue of this generation,” and some hard-working, idealistic Ivy Leaguers and their allies have shown how.

The embodiment of Brill’s dream is a non-union charter school teacher named Jessica Reid. A Teach for America recruit, she engages each of her Harlem fifth-graders in Shakespeare, phones parents about missed assignments, and works into the night tutoring students, meeting parents, and creating ingenious displays for the following day’s lessons. It’s teachers like her who propel the most-disadvantaged children on to college. But such teachers can work their wonders only in non-union charter schools that are free to fire summarily those who, though well-meaning, are less than extraordinary.

Given the perpetually discouraging landscape of education debates, a comparatively optimistic narrative like this one holds obvious appeal, and Brill’s anecdotal vignettes are stirring. Without doubt, today’s public schools tolerate too much incompetence and preserve some spending priorities that make no sense. But you might expect a veteran of Court TV, never mind an advocate of rigorous education, to appreciate the need to fairly present opposing arguments and evidence, even if only to show how they might be refuted. Brill’s failure to do just that is all too symptomatic of the reformers’ campaign more generally, a campaign that got its own start by calling for critical scrutiny of conventional assumptions.

The possibility that teachers unions are far from the biggest problem facing disadvantaged students is not one Brill or DFER want to broach. You wouldn’t know from Class Warfare that students don’t do any better where teacher collective bargaining is prohibited. In non-union Texas, for example, students perform about the same as socioeconomically similar students in union-dominated New York. This is no secret, noted frequently by skeptics of the reformers’ agenda. I would have welcomed Brill’s thoughts about how it can be reconciled with his story.

The complex answer might lie in the social and economic conditions that bring many children to schools, regular and charter, unprepared to take sufficient advantage of what even the most dedicated and inspired teachers can offer. Brill and his heroes have no patience for discussions of, say, children with barely literate parents who rarely read aloud to them, or with unemployed parents too stressed themselves to offer real support, or with untreated asthma that kept them up the night before, or with no place to study because they are now homeless or doubled up with relatives. For the reformers, these are union-inspired excuses, so addressing America’s vast and growing inequalities has no place on their agenda. It’s clear that more flexible union contracts would indeed be a good step, but unless other obstacles to high achievement are addressed, it isn’t likely to make the difference Brill hopes.

Alas, the reformers’ claim that non-union charter schools demonstrate that teacher idealism and dedication alone can prepare the most disadvantaged children for college success doesn’t stand up to scrutiny. Given the charter school hype in Waiting for Superman and Class Warfare, it may seem hard to believe that students in charter schools do not, on average, outperform those in comparable regular schools. But abundant data show just that, and the most careful studies have confirmed it, most recently one by a Hoover Institution researcher who was predisposed to credit charter school success.

Neither Brill’s text nor his notes identify the studies he relies on for his evidence to the contrary, but I can imagine what two might be. One, by Stanford professor Caroline Hoxby, looked at New York charter schools; Gates Foundation researcher Tom Kane conducted the other, examining Boston charter schools. But both the New York and Boston conclusions have been undermined by methodological difficulties, and most academic researchers agree that they fail to refute the frequently replicated conclusion that charter schools overall have not demonstrated paths to superior performance. Evidently Brill is not persuaded by this consensus, but he never explains why.

Instead, Brill invokes “the central evidentiary value of charters like KIPP or Harlem Success: They proved that intense, effective teaching could overcome poverty and other obstacles and that, as Klein liked to say, demography does not have to be destiny.” Again, Brill provides no sources. In fact, there is nothing but anecdotal evidence of KIPP’s purported success. Its results may well be impressive. But KIPP’s promoters have never sought the kind of careful study that could establish whether its students have the long term success that education aims for. And that means not just better passing rates on low-quality standardized tests of basic math and reading, but college completion, steady employment, and low crime rates. KIPP charter schools have existed for more than 15 years now; there have been, and continue to be, many lost opportunities to track such data.

In any case, KIPP and Harlem Success Academies are selective, making comparisons with regular schools challenging. Brill asserts that because charter schools accept students by lottery, their enrollment is representative of the neighborhoods where they locate. This is demonstrably untrue. Parents who choose to enter such lotteries, agree to monitor homework, enforce school rules, and attend parent conferences are representative of some, but not most, parents in inner-city neighborhoods. Some years ago, I asked a research assistant to interview teachers in neighboring regular schools who had urged parents to enroll their children in the Bronx KIPP lottery. The teachers consistently reported that they encouraged only parents who were most sophisticated about education and most likely to support children in an exacting school like KIPP.

Such parents are certainly more disadvantaged than suburban parents, but that’s not the point: To be demonstrably superior, selective charter school students should outperform comparable students in regular schools. Perhaps they do, but that has yet to be shown. And there is now considerable evidence that both KIPP and the Success Academies have high attrition rates. Students who don’t succeed are encouraged or required to return to regular schools. For selective charter schools, this may not be bad policy, but it vitiates comparisons with regular neighborhood schools that must take all comers, including students who rebel against learning, those with expensive and difficult-to-treat disabilities, and those who flunk out of charters.

KIPP’s David Levin acknowledges to Brill that only 40 percent of KIPP graduates actually complete college. After adjusting for KIPP’s selectivity at the front (lottery participation) and back (attrition of less successful students), this could still be better than graduation rates for students from regular neighborhood schools. But it may not be enough better to justify the absolutism of the reformers’ crusade. I wish Brill had examined just a little data to better estimate KIPP’s comparative record on this front.

Central to the reformers’ argument is the claim that radical change is essential because student achievement (especially for minority and disadvantaged children) has been flat or declining for decades. This is, however, false. The only consistent data on student achievement come from a federal sample, the National Assessment of Educational Progress. Though you would never know it from the state of public alarm about education, the numbers show that regular public school performance has skyrocketed in the last two decades to the point that, for example, black elementary school students now have better math skills than whites had only 20 years ago. (There has also been progress for middle schoolers in math and in reading; and less, but not insubstantial, progress for high schoolers.) The reason test score gaps have barely narrowed is that white students have also improved, at least at the elementary and middle school levels. The causes of these truly spectacular gains are unknown, but they are probably inconsistent with the idea that typical inner-city teachers are content to watch students wrestle on the classroom floor instead of learning.

And the data might raise some questions about one of the reformist moves of which Brill is most proud: the Obama Administration’s use of a little-noticed $5 billion provision of the 2009 stimulus bill to induce states to adopt the reformers’ program (they call it “Race to the Top”) of rapidly multiplying charter schools and evaluating teachers, in large part, on the basis of their students’ test score growth. Brill is notably uninterested in exploring the validity of this approach to teacher assessment. Impartial policymakers and nationally renowned educational statisticians have almost uniformly weighed in against the practice. As they point out, the same teachers, using the same instructional methods with similar students, can be deemed effective one year and ineffective the next, because so much more enters into student performance than teacher skill. Scholars also observe that even if test scores were accurate, holding teachers accountable for math and reading scores creates incentives to minimize attention to the sciences, history, civics, the arts and music, physical education, and character development.

It is not that the reformers (or at least some of them) don’t know any better. They are at their most incoherent when they themselves acknowledge the necessity of interventions that might bring disadvantaged children to school more ready to learn, yet simultaneously advocate tough accountability systems that take no account of whether those interventions have been attempted. In a TIME interview just last week, for example, U.S. Secretary of Education Arne Duncan recounted his earlier experiences as superintendent of the Chicago Public Schools:

If children can’t see the blackboard, they’re going to have a hard time learning so we have to get them eyeglasses. We used to get literally tens of thousands of kids eyeglasses every year. If children aren’t fed and are hungry, they’re going to have a hard time concentrating, so we fed tens of thousands of kids three meals a day. We had a couple of thousand kids we were particularly worried about so very quietly we would send them home Friday afternoons with a backpack full of food because we worried about them not eating over the weekend.

Although Brill also interviewed Duncan, and Class Warfare heaps extended praise on him for his promotion of charter schools and test-based merit pay, this short interview in TIME has done more to expose the reformers’ ideological blinders than Brill’s two years of reporting. For despite Duncan’s blunt reflections about the impediments to academic success facing many urban children, as Secretary he has proposed a “Blueprint” for re-authorizing the Elementary and Secondary Education Act that would hold schools accountable for getting all children “college and career ready” by 2020, whether or not they can see the blackboard, come to school hungry every day, or eat over the weekend. And while the “Race to the Top” competition awarded points to states for expanding the charter school sector and developing data systems to tie teacher performance to student test scores, states got no points for providing eyeglasses, or food for the weekend, or for implementing any other of the many practical programs that could ameliorate the social and economic hardships that do so much to impede children’s ability to take advantage of what schools can offer.

The reformers’ arrogance is best on display when Brill gloats about the charade of appointing anti-reformer Linda Darling-Hammond to lead Obama’s official post-election education planning, while DFER, with funds from Eli Broad, wrote a secret memo for the “informal yet real education transition team.” Jon Schnur organized the effort and strove to calm his nervous fellow-reformers, assuring them that the Darling-Hammond appointment was only a sop to a faction that would have no real influence, while DFER’s secret memo set forth the Administration’s actual policy – including the naming of key Gates Foundation and Teach for America operatives for crucial administration policy posts, and calling for use of student test scores to evaluate teachers. It is disclosures like this that make Brill’s book something less than the unambiguous morality tale he aimed to present. Had the reformers been a little less sure of themselves, they might have less to answer for when their program, as it certainly must, eventually implodes.

In the final pages of Class Warfare, Brill reports that this January, his chief exhibit, Jessica Reid, quit her charter school job. She had worked days, nights, and weekends in a superhuman, often frustrating effort to prove that effective teaching alone could overcome the obstacles of child poverty. At 26, she found her role in the fanatical charter school crusade was taking too high a toll on her marriage and her own sense of balance. She signed up to work instead in a regular public school where, protected by union contract, her working hours and duties are now limited—perhaps too limited, but Brill’s heroine saw no other choice.

Reid’s decision apparently caught Brill by surprise, when he was too close to completing his manuscript, too committed to his story line, to step back and seriously consider its implications. But at least Brill, so disinclined to explore challenges to the education reformers’ clichés, reported the denouement. With this sobering spoiler in mind, readers will be in a better position to evaluate the self-righteous certainty that pervades the previous pages of Class Warfare.

***

This is an expanded version of a review of Class Warfare, by Steven Brill, that appeared in Slate.com

—Ellen Dannin, Fannie Weiss Distinguished Faculty Scholar and Professor of Law at Penn State University

The State Department’s J-1 Exchange Visitor Program allows for and facilitates the abuses the students face. Originally designed as a cultural exchange program, the J-1 has been hijacked by employers and turned into a program that provides cheap, exploitable labor.  Employers are not required to advertise their jobs to unemployed U.S. workers, even in this time of double digit youth unemployment. Many employers import a J-1 workforce every year, and then deduct exorbitant amounts from these workers’ paychecks for rent and other expenses, and threaten them with deportation if they complain about their poor wages and working conditions.

The students themselves are required to pay thousands of dollars to participate in the program, to “sponsors” – which are entities that process the J-1 visa on behalf of the State Department and contract with employers seeking workers. The students often have to borrow the money from their families to pay the sponsor fees and for their international travel.  Thus they arrive already indebted to their employer, and are desperate to earn back what they have invested. This is exactly what happened with the J-1 students in Palmyra – thousands of dollars were paid to the Council for Educational Travel, U.S.A. (CETUSA), which then contracted with a labor broker to put the students to work at Hershey’s distribution contractor.

The J-1 students confirm that their experience has not been a cultural exchange. Instead, they work long hours and often end up earning less than minimum wage. As a result, they have little time to meet Americans or to travel to other American cities, or to experience any other sort of “cultural exchange.”

RELATED

• For more on the J-1 Exchange Visitor program, see our recent publication, Guestworker Diplomacy.
• For more information on the National Guestworker Alliance’s Justice at Hershey’s Campaign, visit www.guestworkeralliance.org

On cue, the deficit hawks see this as further evidence of the need to ratchet up efforts to address our long-term deficits. The Committee for a Responsible Federal Budget, for instance, claims “Policymakers need to heed this warning and enact more aggressive deficit reduction that results in stabilizing the debt.”

This is exceedingly misguided. The issue at hand is the need for stronger growth, both here and in Europe. The only plausible economic reason to take action about deficits that are five, ten, fifteen or twenty years away is if it gave us more room in the next few years to have greater government spending to fuel job growth while having higher deficits. That’s not what CRFB or others have in mind and we should resist any efforts to reduce deficits in the near-term which will only serve to slow growth and raise unemployment further.

As many economists have pointed out what we are observing is clearly not fear of U.S. indebtedness or an inability to pay our debts. If that were the case we would see stocks fall and the price of U.S. bonds fall (and interest rates rise to persuade investors to hold the bonds!). In fact, interest rates on ten year bonds have fallen each day from last Friday’s 2.56% rate, to 2.32 to 2.25 and closing at 2.11 on Wednesday. Interest rates have not been this low since the OMG moments in late 2008!

Rather, we’re seeing concern that growth was miserably low in the first six months, that the debt ceiling deal will cut growth further and any response to the S & P downgrade may accentuate spending cuts. Plus, European growth prospects are worsening.

Unfortunately, doing anything to fuel growth and jobs in the near term does not seem to be a priority for either party. The GOP has no political interest in having more growth prior to the 2012 election and what they are proposing–deep and immediate spending cuts–will actually produce the double dip that is now gripping the media world. There is no evidence that deficit reduction, when we have more than 9% unemployment, will do anything to create jobs and much experience to show that it will weaken growth and raise unemployment. Great Britain anyone? U.S in 1937? The GOP diagnosis that job growth isn’t occurring because of anxiety of Obama regulations is also unfounded. It certainly does not match what firms are actually doing. Businesses have been investing in equipment and software to a greater extent than would be expected given the decline of the economy and the faltering demand for goods and service. Private sector employment has grown faster in this recovery than the one under George W. Bush. If firms were concerned about hiring new people they could certainly use their existing employees more, which they are not doing since weekly work hours are still significantly below pre-recession levels. No, job growth has been limited by the fact that the demand for goods and services per person is still substantially below what it was in 2007. Plus, if you look what small businesses say in the NFIB survey it is that poor sales are their biggest problems. They also complain of taxes and regulations, which is hardly breaking news. More interesting is that their stated worries about regulation and taxes is lower under Obama than under any other president since Carter.

Which brings us to the administration. My metric for being serious about jobs is whether a program will significantly lower expected unemployment, which the Blue Chip consensus now says will be 8.5% at the end of 2012. Others, such as Goldman Sachs (who has been more accurate) expect 9.3% unemployment then. The President expresses concerns about jobs but his approach will not move the dial at all. First, all this talk about removing ‘red tape’, patent reform and new trade treaties should be dismissed since they either will not help on the jobs front (i.e. trade) or they will not possibly help in the next year and a half. Second, the President wants to continue the payroll tax holiday and the emergency unemployment benefits program. This is important to do, and should have been done by now. However, we already have these supports in place so they will not really improve our prospects even though losing them will hurt. The infrastructure bank is a great idea but even more important would be to pass the transportation bill before Congress at much higher levels of spending. Last, it is hard to square the President’s concerns about jobs with the debt ceiling deal which essentially prohibits anything worth doing. On the one hand the amount of debt allowed is so tight that further deficit spending is not possible, and anything that’s paid for will necessarily be weak tea. On the other hand the discretionary spending caps prohibit, well, new spending!

So, America, we have to break out of this policy box or we will be locked into persistent high unemployment as far as the eye can see.

Note: This commentary originally appeared in The American Prospect.