Robert Reich’s recent post, “Why We’re Falling Into a Double-Dip Recession” gives the short-term reason, but doesn’t give the long-term explanation. The end of the stimulus spending is partly to blame for the impending double-dip, which Paul Krugman predicted at the beginning of the year. The real question is why is it taking so long for the economy to create sustained job growth? I think the main reason jobs are not returning is because for the past 10 years neither our industries nor our universities nor our government agencies (like NASA) have generated enough significant innovation or new technology to create the kind of growth that allows jobs to keep up with population growth.
This happened partly because investors were gun-shy after the tech bubble burst, but mostly it happened because the elimination of Glass-Steagall in 1999 opened the flood gates for the creation of new financial products like credit default swaps and rampant derivatives markets. So, instead of our nation’s best and brightest creating alternative energy or new software or biomedical breakthroughs, they were busy creating toxic assets and new hedge funds. And instead of the government investing in science and education, it was busy spending the country into trillion dollar deficits while playing Elmer Fudd chasing those wascally terrorists all over Iraq and Afghanistan. Creating the world’s largest prison population didn’t help either.
In addition to a new stimulus that puts people to work on short-term repair projects, the US needs to scale back its prison and military expenditures and invest in people and industries in ways that create long-term economic growth and jobs. We need a new New Deal. Lets bring home most of the troops and put them in the Army Corps of Engineers building wind farms and solar fields. Energy security not only means environmental security, but also lessens the need for overseas military adventures. That is true national security. It will make Japan happy, too. Their Prime Minister had to resign last week, largely because he could not fulfill his campaign promise to move a US military base out of Okinawa. We also need a new New Deal to correct for the past 30 years of conservative neglect. In the business world we call it human capital. And in his speech on the economy last week, Obama called it “A new foundation”:
“It’s a foundation based on investments in our people and their future; investments in the skills and education we need to compete; investments in a 21st century infrastructure for America, from high-speed railroads to high-speed Internet; investments in research and technology, like clean energy, that can lead to new jobs and new exports and new industries.”