More Spending Is Necessary to Clean Up The Economic Mess

SOURCE: AP/Paul Sancya

Jamal Randle, from left, Loren Cowling, and Dave Jackson fill out applications for positions at a new bar and restaurant in Detroit on September 25, 2009. In September 1982, the unemployment rate broke 10 percent, reached 10.8 percent December and remained above 10 percent for the first half of 1983.

By Scott Lilly | October 7, 2009

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The Labor Department’s September jobs report can only be described as horrific. The media and markets focused on the fact that the 263,000 jobs lost in September exceeded the forecast by nearly 100,000. But there was equally bad, in fact worse, news in the details.

Someone who is laid off for a few weeks may have to postpone a vacation. Someone who is out of work for several months may miss a car payment. But people who are out of work for more than six months are likely to see their life become unhinged. The number of people who were looking for work in September but had been out of a job for more than 27 weeks increased by 450,000 to 5.4 million. A look at the bench mark year of 1983 provides some context to that number. That year was the standard for measuring the severity of subsequent recessions because, up until now, it was by far the biggest economic downturn since the Great Depression.

In September 1982, the unemployment rate broke 10 percent, reached 10.8 percent in December and remained above 10 percent for the first half of 1983. The current downturn will, hopefully, not be as bad in terms of the percentage of the workforce that are unemployed. But if you compare the number of long term unemployed—which is probably a much better index of social misery—the current recession is already significantly worse.

The portion of people who were out of work for more than 27 weeks in 1983 never exceed 2.6 percent of the total workforce. And those with more than 27 weeks of unemployment averaged less than 2.3 percent of the workforce for the year as a whole. The 5.4 million Americans who found themselves in that status in September 2009 represent 3.5 percent of all workers—a rate almost 50 percent higher than in 1983 and one that is almost certain to get worse.

There are many in the Congress who are understandably suffering from spending fatigue. The hole that the current recession left in the American economy is enormous, and the cost of restoring the nation’s economic health is exceeded only by the cost of not restoring it. We have done much of what is needed, but the nation cannot turn its back on the monumental amount of suffering that is still taking place.

States are rapidly running out of Medicaid funding. Millions of Americans will soon be on the edge of exhausting their unemployment benefits. The expansion of COBRA to provide more affordable health care benefits to the unemployed needs to be extended beyond the first of the year. The fiscal crisis in state and local governments is preventing them from contributing to the solution, and they are now a major part of the problem. The nation lost more jobs in state and local government than in manufacturing last month.

Adding still further to the already towering deficit is a difficult and painful task, but it is the necessary consequence of years of economic mismanagement, and it is an additional step that is necessary to get the country back on the road to recovery.

Scott Lilly is a Senior Fellow at the Center for American Progress. He previously served as clerk and staff director of the House Appropriations Committee and executive director of the Joint Economic Committee.