Full Employment

[Marvin Sussman]

We need a battle cry that expresses what everybody needs, wants, and can get by a rational policy that can gain the support of a large majority: FULL EMPLOYMENT NOW!

By full employment, I do not mean 5% unemployment - or 4% or 3%. During WW II, the unemployment rate was probably below 1%. In 1943, my cousin was drafted into the army at age 30, blind in one eye, to serve in administrative posts. He was drafted because all of the other males in the United States aged 18 to 35 who were in better physical shape were deferred from the draft because of their important work in industry or agriculture.

By full employment, I mean a level of employment that enforces high wages and respect for the worker. In 1942, there was a cafeteria on Roosevelt Road near Halsted where most of the employees were below 21 or well over 60 or handicapped in some way. The owner had a large sign over the counter that said:
"Please tip our bus boys well. Customers, we can get."

That's the result of full employment: respect for the worker.

How do we get full employment? By making convincing rational demands for federal investment in infrastructure. Our need for infrastructure is perpetual, if not infinite. The material is at hand, Over 20% of our productive capacity is idle. Over 20 million unemployed are available for work that cannot be outsourced. These millions are being housed, fed, clothed, and medicated at public expense. All that is needed is a convincing rational explanation that spending on infrastructure is self-financing.

Who says we can’t spend on infrastructure? With a 2.5 multiplier (http://www.KeynesForum.com), $1T of annual infrastructure spending induces an additional $1.5T of annual consumer spending. That’s a total of $2.5T added annually to the GDP. Since the total tax burden at all levels of government is about 30% of GDP, $1T of annual infrastructure spending adds $0.75T to annual tax revenue. This reduces the annual infrastructure cost to $0.25T.

Also, $1T of annual infrastructure spending would employ 10 million jobless workers, each drawing the equivalent of $25,000 in annual relief benefits of all kinds. The $0.25T annual benefit savings would nullify the infrastructure cost!

But wait, there’s more! Because, on average, consumers’ savings amount to about 10% of their consumption, about $0.15T would be banked annually. Since banks can lend over 10 times their reserves, they can annually create at least $1.5T of additional credit. If business finds that government spending is putting people back to work and feels like investing 10% of the amount that government spends, that effectively increases the multiplier by 10%. That would increase the annual tax revenue to $0.862T. Thus, spending $1T annually on infrastructure could be a net budget gain of $0.112T!!

Also, if $1T of infrastructure lasting over 30 years produces a 1% annual productivity gain in a $15T GDP economy, that’s worth $0.150T. Thus, the total budget gain produced by $1T of annual infrastructure spending could reach $0.262T = $262B. What deficit?

This is beginning to look a lot like Christmas!

FULL EMPLOYMENT NOW!

Marvin Sussman
marvin@KeynesForum.com
See my website: KeynesForum.com