Robert Pollin on Full Employment   

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As you are acutely aware, the economic crisis today is the most severe since the Great Depression of the 1930s. It has been heartening to see you organize a full-scale attack to stabilize financial markets and fight the recession.

By necessity, the program you have advanced thus far focuses on the short run. Lots of questions remain open, including a most basic one: what are the principles on which we should rebuild the economy after the recession ends?

As one starting point, I believe your administration should commit to the goal of full employment at decent wages. This would return us to an idea that, for a generation coming out of the 1930s depression, was a moral centerpiece of economic policy around the world. In this current historical juncture, the most effective path to long-term full employment will be to transfer substantial amounts of spending out of the military and the fossil fuel energy sector-oil, natural gas, and coal-and move these funds into health care, education, public infrastructure, and, most urgently, constructing a clean-energy economy.

Since full employment has been off the radar screen for a generation, it is easy to forget its transformative power as a policy goal. When we want to get a sense of the living standard of a person or family, we would almost always begin with a simple question: does somebody in the family have a job and, if so, how much does it pay? Whether you can get a job-and if so, whether the job offers decent pay, a clean and safe environment, and fair treatment for you and your coworkers-matters a lot to almost everyone. Correspondingly, unemployment can have a devastating impact on families, even if they include two wage earners.

When an economy operates at or near full employment, overall spending expands. This means more buoyant markets, greater business opportunities for both small and large firms, and strong incentives for private businesses to increase their level of investment. A high-employment economy is also the best single tool for fighting poverty.

Let's recall the experience of the late 1960s. The stimulus then came from both the Kennedy-Johnson tax cut and the buildup of Vietnam-related government spending. Unemployment fell below 4 percent in 1966 and remained there until 1970. This brought rising wages, better working conditions, and less job discrimination against women, African Americans, and other minorities, even while these gains were underwritten by an immoral war.

Of course, the world has changed dramatically since the 1960s. Among other things, some analysts argue that globalization has undermined the viability of full employment as a goal. But recall the U.S. economy in the late 1990s, the end of the Clinton presidency, when unemployment fell below 4 percent for the first time since 1969. Once that happened, the same patterns found in the late 1960s re-emerged-i.e. improved wages and working conditions, along with declining poverty.

The problem with the late 1990s was that the rapid economic growth that forced unemployment down was financed by an unsustainable stock market bubble. But this experience demonstrates that, even in the face of globalization, full employment is still attainable. The challenge is to make it sustainable through policies that offer long-term benefits.

Right now, we spend about $600 billion per year on the military and another $600 billion within the coal, natural gas and coal sectors, totaling $1.2 trillion, or about 8 percent of GDP. Your administration could plan on redirecting something like 25 percent of that spending, $300 billion, toward public infrastructure, health care, education, and green investments, including building retrofits, expanding public transportation, and supporting innovation in solar and wind power. Compared with spending on the military and fossil fuel sector, a package of public infrastructure, green investments, health, and education will also generate roughly 3 million more jobs with that same $300 billion.

There are two major reasons for this job advantage. The first is "labor intensity" of spending-more money is being spent on hiring people and less on machines, supplies, and consuming energy. The second is "domestic content"-more money is staying within the U.S. economy as opposed to buying imports or spending abroad.

In a post-recession world, a restructuring based on expanded support for health, education, infrastructure, and green investments could push the unemployment rate down to about 3.5 percent. We would then see the same benefits of a near full-employment economy as in late 1960s and 1990s. But this time, we would have accomplished full employment not through war spending, a financial bubble, or "drill, baby, drill," but rather through expanding high-quality social services, rebuilding our infrastructure and taking major steps toward creating the clean energy economy of the future.

Robert Pollin is codirector of the Political Economy Research Institute (PERI) at the University of Massachusetts-Amherst. His books include Contours of Descent: U.S. Economic Fractures and the Landscape of Global Austerity.