Washington's Odd Jobs Attitude

Why high unemployment is terrible for the economy.

By Daniel Gross
Posted Friday, July 2, 2010, at 10:15 AM ET

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Last week, I argued that the Federal Reserve doesn't seem to care much about high unemployment. Apparently, very few other people in Washington do, either. That's one way of interpreting the events of the last week. Congress is adjourning without extending unemployment benefits, in large measure due to repeated Republican filibusters. On Thursday, President Obama gave a major address about … immigration reform. All this on the eve of a jobs report that showed the economy lost jobs in June, due largely to the loss of temporary census jobs.

The economy is now presenting a strange dichotomy. The corporate sector has returned to rude health, with improved balance sheets and tons of cash. It has helped lead the recovery. But without the mighty American consumer, who generates 70 percent of economic activity, participating to the fullest degree, the recovery will seem anemic. Without a healthy jobs market, the recession-shocked consumer won't spend.

And yet Washington's response seems to be a collective throwing-up of hands. There are a few things the government can do about persistent long-term unemployment. First, it can lessen the pain it causes by expanding the safety net, extending unemployment-insurance benefits so that the long-term unemployed have a source of cash to help them stay current on rent, mortgage, and credit card bills. Second, it can respond to persistent long-term unemployment by enacting policies aimed at creating and preserving jobs. These can take the form of summer jobs programs, enhanced public works programs, aid to strapped municipalities so they can avoid layoffs, and tax cuts and credits for investment and hiring.