Tuesday, December 30, 2008

Five Bailout Lessons From Katrina

Five Bailout Lessons From Katrina, from: CommonDreams.org
Published on Wednesday, December 24, 2008

Five Bailout Lessons From Katrina

by Bill Quigley

The U.S. has committed nearly three trillion dollars to the financial bailout so far. The Federal Reserve has made more than $2 trillion in emergency loans and another $700 million has been pledged through Congressional action. Much more money is coming.

Things better for your community? I didn't think so.

Welcome to Katrina world. Despite pledges of a hundred billion dollars we are still in deep pain along the Gulf Coast. What happened?

Unless citizens are vigilant and demanding, the entire U.S. will be subjected to the same forces that swept through the Gulf Coast after Katrina -- spending huge amounts of money and leaving a second disaster behind.

Despite promises of buckets of bucks, New Orleans still has sixty thousand abandoned homes. Media reports say that 75% of the abandoned buildings have homeless people sleeping in them. Public healthcare and public education and public housing are all less available and being thoroughly privatized. Crime is sky high though we still have 100 National Guard members patrolling our streets.

So what lessons can be learned from Katrina world that apply to the financial bailout?

... read rest of post at: Five Bailout Lessons From Katrina CommonDreams.org

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Saturday, December 27, 2008

Borosage/Latke: A New New Deal?

A New New Deal?

by Robert Borosage and Eric Latke, The Nation 12/23/08

"If the United States wants to retain a broad middle class in a global economy, it has little choice but to finance a public social contract - from healthcare to lifelong learning to pensions above Social Security - that will be vital to providing the security that families need to prosper. Expanded public investment - in research and development, twenty-first-century infrastructure and new energy - will be essential to sustaining a competitive high-wage economy. The new economy will also need several other building blocks: a new global economic strategy; a sensible industrial policy, beginning with a transition to new energy; an aggressive wage policy (providing living wages, empowering workers to organize, curbing executive plunder and fat bonuses) that helps distribute the benefits of profits and productivity gains fairly; and a reregulation of finance to make banking boring once more."

"This broad transformation - a true new New Deal - entails a sea change in values and policy from the conservative era of the past thirty years. It will have to rally a public that yearns for
greater security but is sensibly suspicious, after decades of conservative
misrule, of the government's capacity to do anything."

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James Galbraith on Remedies for Economic Meltdown

James K. Galbraith: The Johnson Legacy and the Obama Challenge: Remarks to the LBJ Centennial Conference

"We have spent a generation trying to repeal the New Deal and the Great Society, and the fact that the results are disastrous is now clear to all. "

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Tuesday, December 23, 2008

Executing the Main Street Economic Recovery Program Equitably | OurFuture.org

Executing the Main Street Economic Recovery Program Equitably OurFuture.org

By Susan Ozawa
December 22nd, 2008 - 4:14pm ET

Given the male dominated nature of construction and heavy manufacturing involved in infrastructure projects Eileen Appelbaum, at the School of Management and Labor Relations and Director of the Center for Women and Work recommends that proposals pushing infrastructure investment include construction of child care centers and additional space to accommodate expanded pre-K programs. Appelbaum also recommends including in this investment funds targeting training historically marginalized workers and incentives alongside other mechanisms to ensure these jobs are distributed equitably.

A petition along these lines can be signed here. Progressive economists highlight the importance of the quality of the jobs created, pushing for those receiving recovery funds be held accountable to create jobs with livable wages, health insurance, paid sick days, paid holidays and vacations. Monitoring and oversight to ensure transparency is fundamental. Provisions are outlined by the National Partnership for Women & Families here.

Endorser of the Main Street Recovery Program, Randy Albelda, professor of economics and Senior Research Fellow at the Center for Social Policy at University of Massachusetts Boston, highlights the need to address our severe deficits in social infrastructure as well as physical infrastructure. The Main Street Economic Recovery Program emphasizes spending on education, health care and child care, recognizing these should be down payments on larger reforms in our domestic budget priorities.
Signatory, Robert Drago, Professor of Labor Studies and Women's Studies at Penn State University further highlights the economic benefit of child care funding. The multiplier effect embodied in services is stronger than pure construction partly because child care workers earn less, but also because infrastructure investment is capital intensive and can involve foreign inputs although the Main Street Recovery Program emphasizes procuring domestic supplies.

You can find Drago’s full argument here.

Following this lead, the Direct Care Alliance has laid out a series of recommendations to President-Elect Obama here. To avoid the kinds of jobs created after Katrina, to begin to set in order our ailing economy and to redirect our comprehensive infrastructure priorities these recommendations offer sound guidance on executing a progressive Main Street Economic Recovery Program that can benefit us all.
Help us spread the word about these important stories...

Posted on Campaign for America's Future:> http://www.ourfuture.org/blog-entry/2008125222/executing-main-street-economic-recovery-program-equitably

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Monday, December 22, 2008

Is Pump-Priming Enough?

Maybe it can't: A trap in Obama's spending plan , December 21, 2008

As the recession deepens, President-elect Barack Obama is gearing up to spend hundreds of billions of dollars on public investment projects, counting on them to lift the economy, as they have in the past.

But this time that may not happen. Public spending, American style, has worked best in good times, when people have jobs and executives are eager to invest. A new public highway is soon lined — in good times — with stores and malls filled with consumers. A dollar spent by government generates three or four from the private sector.

That symbiosis makes a humming economy hum more, as it did in the 1950s and '60s. But it may not work that way when the American economy is in full retreat, as it was in the 1930s and seems to be today.

.... By January, Congress will probably be asked to approve an outlay of more than $700 billion. Spent in one year on construction, research or equipment, it might well offset the contraction at first. But unless it also revived general confidence, the economy could collapse again, once the money was gone.....

"It is not in the nature of a market system to have adequate private investment all of the time," said Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts at Amherst. "So we used public investment to smooth things over and improve the climate for private investment."

That changed. In the 1970s, the public reacted against high taxes and growing budget deficits, and conservatives argued that putting money in private hands would lift the economy more effectively. Public investment tapered off, and was used less as a tool of economic policy as the economy experienced the increasingly sharp ups and downs of the 1980s, 1990s and the new century.

Now, in the opening months of the worst bust since the Great Depression, Obama is expected to seek sustained outlays over at least two years to repair roads, bridges and waterways; to build and repair public schools; to expand the broadband network; to digitize medical information; to advance green technology. An economic adviser says his goal is "to encourage private investment, particularly in areas where we have too little investment today, for example, solar systems and wind power."....

Like Roosevelt's dams, Obama's expenditures will no doubt generate jobs and wages in the construction phase. But in 1937, Roosevelt, thinking that the private sector could sustain itself, pulled back on public spending. Some historians say this was a big reason the economy sank again. .

Obama faces a similar danger. Green-technology spending might spawn a far more efficient solar panel, but investors still might shrink at manufacturing it. What if consumers — having lost equity in their homes and scrimping on cars, vacations, even college tuition — were reluctant to buy and install the panels? "There are so many problems today and no good news, and that is enough to stop the impact of what Mr. Obama does," said Moses of Hunter College.....

Whatever the obstacles, Obama's plan would mean giving up the view — widely held since the 1970s by economists, policy makers and business executives — that the private sector, by itself, is the key source of prosperity and full employment, and government spending is inefficient.


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Sunday, December 21, 2008

The Case for A Full Employment Policy

On his blog, Economic Reform, 2008, Ben Leet has published a wide-ranging essay that gives an overview of past government policies to address unemployment, and options for creating a full employment program. In his essay, The Case for a Full Employment Policy, Leet writes:

We are a very wealthy nation, and we can well afford to employ all unemployed and willing workers through public employment. The social benefits would be revolutionary...

On December 1, 2008, the National Bureau of Economic Research announced to the public that the U.S. economy has been in economic recession since a year ago, December, 2007. We face a possible social breakdown similar to 1932. In October of 2008 6.5% of the workers are unemployed (10,100,000 workers), 7.1% are underemployed or discouraged from looking for work (11,700,000 workers), and still another 16.2% are working full-time for wages that pay less than the poverty rate for a family of four (17,600,000 workers). The combined total is 29.8 % of the workforce, or 39,400,000 workers. Many economists expect additional workers to fall into these categories in the coming months.(1) For every job opening listed there are six unemployed, according to the Bureau of Labor Statistics.

When there are more workers than jobs, or fewer jobs than workers, what should society do? Should society let joblessness skyrocket with all the negative social hardships, or provide jobs through public expenditures? Private business owners downsize their operations during economic downturns. The surplus labor force --- the unemployed --- demand the right to earn a living. The practical interests and property rights of affluent business owners conflict with the human rights of workers and non-owners. Owners cannot be forced to hire unneeded workers. Citizens cannot be left to starve. Public adjustments must be made. A social choice has to be managed.

Toward the end of Leet's essay, there's a good typology of different types of public service jobs that could be created through public job creation.

Government Sponsored Jobs
A national public full employment program is proposed by Professor L. Randall Wray in his book Understanding Modern Money. He calls for the federal government to be the “Employer of Last Resort” and the jobs it creates would pay workers a “Basic Public Service Wage.” The following are job positions that could be created:

1. Companions to the elderly, orphans, physically disabled and mental health patients. Each companion would attend classes or seminars in caregiving, and perhaps also attend group discussions with other ELR companions. This position would serve as a preparation for private sector jobs.

2. Public school classroom assistants who tutor in reading, writing and math. Field trip aides for classes on out-of-school excursions. After-school assistants in academic support and/or art and recreation programs.

3. Child care assistants, and Head Start and preschool assistants.

4. Safety monitors and facilitators assigned to public schools, playgrounds, transit hubs, downtown areas.

5. Neighborhood clean-up crews for abandoned properties, and highway clean-up crews.

6. Auxiliary assistants in low-income housing restoration projects such as home insulation projects.

7. Public library assistants.

8. Environmental safety monitors testing for lead paint contamination, water quality, beach contamination. Aides for restoration of ‘super fund’ clean-up sites and other environmental clean-up projects.

9. National and state park improvement teams.

10. Artists, musicians and performers in community beautification projects, and performing in schools.

11. Community and cultural historians.

12. Public assistants collecting information and monitoring compliance with government regulations.

13. Prison education assistants, and liaisons to juvenile detention facilities.

This list is drawn mostly from L. Randall Wray’s book Understanding Modern Money. Wray concludes that, “The federal government would simply provide as much funding as necessary to let every state and local government hire as many new employees as they desired, with only two constraints: these jobs could not replace current employment, and the could only pay BPSW [basic public service wages] (or at least the federal government could reimburse wages at BPSW rate). Finally a similar offer could be made to qualifying non-governmental non-profit organizations, such as AmeriCorps, VISTA, the Student Community Service Program, the National Senior Service Corps, the Peace Corps, the National Health Service Corps, school districts, and Meals on Wheels.”
As we think about all the work in the US that needs doing, let's bear in mind that the people who do it should be compensated fairly. Most advocates for full employment would agree that wage levels for jobs created in a public job creation program should at least be living wages, as suggested by Wray and others.

In our job creation plan, The Drive for Decent Work, the National Jobs for All Coalition has called for new publicly-created jobs that "pay prevailing wages for comparable work in the private sector, with collective bargaining rights, labor protections and vacation time." (p. 11) Also, Robert Kuttner has called for making every human service job in the United States a decent job with good wages and benefits.

Thanks very much to Ben Leet for his efforts to inform and activate the public on full employment issues.

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Saturday, December 20, 2008

Real economic need: a long-term stimulus

Stimulus Is for Suckers: We Need a Recovery Plan that Will Last for Years
By James Galbraith, Mother Jones. December 12, 2008.

....How big and far reaching should changes to the economy be? Nearly everyone in Obama's circle agrees that more public spending and tax cuts are needed: a "stimulus package." The cautious say $150 billion (about 1 percent of GDP), while the bold and the worried say $500 billion (or just more than 3 percent of GDP). Both focus attention on what is needed in 2009 -- as if the economic problem can be solved in a year.

That is almost certainly wrong. ....

What began as a housing collapse will not go away soon. Empty houses wreck home values for their neighbors. The ratings agencies are discredited, the investment banks are gone, and high finance is in debt deflation. Foreign investors won't soon trust the market for US private debt, even for blue chip corporations, so long as they remain saddled with toxic health care costs. Regulation will have to be rebuilt. In short, the money wells have been poisoned, and it will take time and patient effort to clean them up.

The historical role of a stimulus is to kick things off, to grease the wheels of credit, to get things "moving again." But the effect ends when the stimulus does, when the sugar shock wears off. Compulsive budget balancers who prescribe a "targeted and temporary" policy followed by long-term cuts to entitlements don't understand the patient. This is a chronic illness. Swift action is definitely needed. But we also need recovery policies that will continue for years.

First, we must fix housing. We need, as in the 1930s, a Home Owners' Loan Corporation to restructure failed mortgages on sustainable terms. The basic objective should be to keep people in their homes by all necessary means, except where borrowers committed willful fraud, so as to stop the spread of blight and decay. Government can use its power over banks to make this happen, as it has with IndyMac, the California bank that is now, as a federally owned company, revising unsustainable mortgages. But this is no small endeavor: The FDR-era HOLC operated for almost two decades and at its peak employed 20,000 people.

Second, we must backstop state and local governments with federal funds. Otherwise falling property (and other) tax revenues will implode their budgets, forcing destructive cuts in public services and layoffs for teachers, firefighters, and police. And when these public servants are laid off, guess what? They have trouble paying their mortgages. General revenue sharing -- unrestricted federal grants to states and towns, a program invented by Richard Nixon and killed by Ronald Reagan -- is required. Luckily it can be reintroduced quickly on a large scale.

Third, we should support the incomes of the elderly, whose nest eggs have been hit hard by the stock market collapse. We can't erase those losses case by case (nor should we), but we can sustain the purchasing power of the group. The best way is to increase Social Security benefits. Useful steps would include boosting the formula for widowed spouses, ensuring a minimum benefit for retirees who worked their whole lives in low-wage jobs, and allowing college students to receive survivors' benefits up until the age of 22. But let's go further and raise benefits across the board, which has not been done for a generation. I'd say raise them 30 percent, and let the federal government make the contributions for five years. This would be good for the elderly, who could retire; good for working-age people, who would replace the retiring; and good for the economy, since people who need money spend it when they get it.

Fourth, we should cut taxes on working Americans. Obama proposes to effectively offset the first $500 of Social Security taxes with a refundable credit. It's a good idea, but can be expanded. If the economy continues to spiral downward and a really large fiscal boost is needed, let's declare a payroll tax holiday, funding Social Security and Medicare directly from the treasury, until the economy gets back on track. Workers would get an immediate 8.3 percent raise to help meet their mortgages; employers would have the same amount to spend on wages, job creation, or investment. (Not all efforts to jump-start the economy deliver so much bang for the buck. See chart below.)

Is this the standard "liberal line" -- borrow and spend? No. It is the situation, not the philosophy, that demands this action both grand and sustained. Economic recovery in an existential crisis like this means actually building a new economy. For that, we need investment -- to restore our roads, rails, transit, broadband, and water systems, to build parks and museums and libraries, to protect the environment. Right now, states and localities can't borrow for these things. Creating a National Infrastructure Fund, using Uncle Sam's borrowing power to put money where it's needed, is one way forward. Federal capital spending should be bond financed and exempt from budget rules, especially pay-as-you-go. It makes no sense to finance projects whose benefits will last for 50 years solely from tax revenues of today.

Finally, we must change how we produce energy, how we consume it, and above all how much greenhouse gas we emit. That's a long-term proposition that will require research and reconstruction on a grand scale: support for universities, for national labs, for federal and state planning agencies, a new Department of Energy and Climate. It's the project around which the economy of the next generation must be designed. It's the key to future employment and future growth -- and to our physical survival.


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Tuesday, December 16, 2008

Call for Green Stimulus from Environmental Activists

Just in case you thought Poland was the only place where activists were worrying about justice for everyone in the greenhouse era, good news today of a widespread call in the United States for building a green economy that's also a fair economy. Sixty groups from around the U.S. signed on to a letter to Barack Obama's environmental team asking that:

As you draft and debate proposals to stimulate the American economy, we strongly urge you to make the recovery package as green and as equitable as possible. We propose these principles as benchmarks against which all stimulus proposals – indeed, all energy-related proposals coming out of the new administration and Congress – should be measured. The stimulus must:

- Maximize investments in the transition to a green, inclusive economy.

- Focus on fixing, improving efficiency, and lowering energy costs for our existing infrastructure – our buildings, roads and bridges, transmission grid, public transit systems, and manufacturing plants – rather than on new development.
Promote high quality, family-supporting jobs here at home.

- Provide opportunities for under-served communities to access these high quality jobs, through investments in training programs and partnerships that promote career ladders and "pathways out of poverty."

- Drive funding to states, cities, tribes and communities, and allow them some freedom to decide where and how they invest in their own economies.

Meanwhile, the team on the receiving end of that lobbying got clearer today too, and it includes some real champions of the environment: former EPA secretary Carol Browner, Nobel prize-winning physicist Steven Chu, Lisa Jackson from New Jersey, and Los Angeles deputy mayor Nancy Sutley. This is a very different team than the one that has 'managed' energy policy for the last 8 years in the United States, and the news seemed to encourage delegates from around the world here in Poland.

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Sunday, December 14, 2008

Don't Mourn - Professionalize!

Better Long-Term Care jobs will boost economy

Published by dcardin on November 13, 2008 in PHI Blog.

Economics writer Robert Kuttner has some advice for President-Elect Barack Obama in his new book Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.

Kuttner makes a strong case for professionalizing the human services sector – jobs which are harder to outsource – to boost the U.S. economy.

Last week, he told NPR’s Fresh Air, “All jobs taking care of America’s children and taking care of America’s old people and taking care of America’s sick people, by definition, these are jobs that have to be close to home.”

He told Fresh Air interviewer Terry Gross that Certified Nurse Assistants (CNAs) are doing 95 percent of the hands on care in nursing homes, making much less than $10 an hour with very little training, and a turn over rate above 200 percent.

“They could get better training. They could make more like $15 an hour,” he said. “They could join the middle class. They could treat our parents and grandparents with better professional skill and that would be both an act of macroeconomic stimulus—it would also be an act of mercy. These are the things we should be doing as a country. These are the things we need to do to get out of an economic crisis…”

Also see: Good Jobs for Americans who Help Americans, American Prospect, May 8, 2008

Here is a very straightforward proposal.

Let's have a national policy to make every human-service job a good job -- one that pays a living wage with good benefits, and includes adequate training, professional status, and the prospect of advancement -- a career rather than casual labor.

Don't mourn -- professionalize

These, after all, are jobs caring for our parents, our children, and ourselves. Transforming all human-service work into good jobs would not merely replenish the supply of decent work. It would vastly improve the quality of care delivered to the elderly at home or in institutions; to young children in pre-kindergartens or day-care facilities; and to sick people whether in hospitals, hospices, outpatient settings, or their homes.

These are also the jobs that cannot be outsourced. Even if we succeed in reviving American manufacturing, the process of automation means that America is almost certain to become even more of a service economy over time. Good service-sector jobs can help replace for good factory jobs.

See Kuttner Interview about his book "Obama's Challenge" on PBS Now

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AP: Obama banking on large-scale public works project

The Associated Press: Obama banking on large-scale public works project

Obama banking on large-scale public works project
By ANN SANNER – Dec 6, 2008

CHICAGO (AP) — President-elect Barack Obama said Saturday that he wants to revive the economy and create jobs by upgrading roads, schools and energy efficiency in a public-works program whose scale has been unseen since construction of the interstate highway system in the 1950s.
He offered no price estimate for the grand plan, how the money might be divided or the effect on the country's financial health at a time of burgeoning deficits.
The ideas were outlined in the weekly radio address the day after the government reported that employers cut 533,000 jobs in November, the most in 34 years. They are part of a vision for a massive economy recovery plan Obama wants Congress to pass and have waiting on his desk when he takes office Jan. 20.
The president-elect's address never once used the word "spend," relying instead on "invest" or "investments," and pledging wise stewardship of taxpayer money in upgrading roads and schools, and making public buildings more energy-efficient.
"We won't just throw money at the problem," Obama said. "We'll measure progress by the reforms we make and the results we achieve — by the jobs we create, by the energy we save, by whether America is more competitive in the world."
Obama said his plan would employ millions of people by "making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s." He said state officials would lose the federal dollars if they did not quickly use the money to repair highways and bridges.
According to the Federal Highway Administration, a 1991 final estimate of the cost of the interstate system put it at $128.9 billion, with a federal share of $114.3 billion. The estimate covered only the mileage (42,795 miles) built under the interstate construction program. Construction of the system began in 1956 under President Dwight Eisenhower.
More than 5,000 highway projects are ready to go today, state transportation officials say, if Congress will pony up $64.3 billion as part of an economic aid plan. The American Association of State Highway and Transportation Officials, which compiled the list, said the projects would provide jobs and help reduce a backlog of crumbling roads and bridges.
A bipartisan group of governors recently met with Obama to press for some $136 billion in infrastructure projects in addition to money for health care costs.
Several governors welcomed Obama's economic plan.
Virginia Gov. Tim Kaine said the state had more than a billion dollars in "ready-to-go" projects that have been planned for and can be under contract within 180 days. "His plan will put people to work and give the economy a critically important boost," Kaine said in a written statement.
In a joint statement, New York Mayor Michael Bloomberg, Pennsylvania Gov. Ed Rendell and California Gov. Arnold Schwarzenegger said it would help the U.S. stay ahead of other countries. "To stay competitive globally, the time to repair and modernize our nation's infrastructure is now," they said.
In the address, Obama also said he wants to install energy-saving light bulbs and replace old heating systems in federal buildings to cut costs and create jobs.
School buildings would get an upgrade, too. "Because to help our children compete in a 21st century economy, we need to send them to 21st century schools," Obama said.
As a part of the package, Obama said he wants to expand broadband Internet access in communities. "Here, in the country that invented the Internet, every child should have the chance to get online," he said.
Hospitals also should be connected to each through the Internet. He said he wanted to ensure the facilities were using the latest technology and electronic medical records.
Obama planned to announce more details of the economic recovery plan in the coming weeks.

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Job openings compared to number looking for work

Each month, the National Jobs for All Coalition publishes an expanded count of the unemployed, based on Bureau of Labor Statistics data. This count includes people who want work, but are not included in the official count of the unemployed--part-time workers who want full-time work, along with those who want a job but had not looked for one because they didn't expect to find any, or weren't able to work for a variety of reasons, including lack of child care or transportation, or a disability. When these groups are added to those included in the official measure, the unemployment rate roughly doubles. When we compare this expanded number to reported job availability, we find that in November, for example, there were more than seven job wanters for each available job. [Incidentally, the efforts of NJFAC and its supporters were a major reason that Congress appropriated funds for the Dept. of Labor to collect job vacancy data.]

Following is a report on job vacancy statistics from the Economic Policy Institute.

Job openings rapidly dwindle as unemployment pushes upward
by Tobin Marcus

The Bureau of Labor Statistics has released the October Job Openings and Labor Turnover Survey (JOLTS) data, which indicates that there were only 3.1 million job openings in the economy, down nearly 25% from the start of the recession in December 2007.

enlarge image(figure)

While that's bad, what makes matters worse is that this rapid decline in job openings has been accompanied by a sharp increase in unemployment. In October 2008 the number of job seekers topped 10 million, more than three times the number of jobs available. The acceleration has been startling: the number of job seekers per opening has skyrocketed from 1.9 at the beginning of this recession to 3.3 less than a year later in October 2008. The rapid increase in this ratio clearly indicates the weakness of the current labor market and the difficulty that workers are having finding jobs. Unfortunately, this ratio will likely continue to worsen for the forseeable future, given that in November unemployment increased by another 250,000 jobs.

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Tuesday, December 9, 2008

Conservative attack on the New Deal and a Counter

The next Administration's planning for a stimulus program to create jobs has generated a counterattack on the New Deal by conservatives. Their historically inaccurate argument is that government policy had the effect of discouraging private investment.

Conservative George Will supports Russell Roberts [George Mason University]:
"By acting without rhyme or reason, politicians have destroyed the rules of the game. There is no reason to invest, no reason to take risk, no reason to be prudent, no reason to look for buyers if your firm is failing. Everything is up in the air and as a result, the only prudent policy is to wait and see what the government will do next. The frenetic efforts of FDR had the same impact: Net investment was negative through much of the 1930s."

Though the data are accurate, the interpretation is not. Net investment was negative because firms don't add plant capacity [net investment] if they don't have enough customers for their existing plant. They won't even if they have ample cash surpluses. As for the data, as soon as the New Deal began, gross investment, which includes replacement capital, and net investment rose every year except 1938. Even in years when net investment was negative, its negative value was diminishing, a good sign. In 1938, The Administration, in a poorly timed effort at budget balance, cut back the stimulus and thus created a recession within the depression.

Here is Brad de Long's response:

Lessons from the Great Depression Blogging

Apropos of Krugman's evisceration of the underbriefed George F. Will http://delong.typepad.com/sdj/2008/11/what-a-change-t.html:

Path Finder

I have never been able to make any sense at all of the right-wing claim that the New Deal prolonged the Great Depression by creating a "crisis of confidence" that crippled private investment as American businessmen feared and hated "that Communist Roosevelt." The crisis of confidence was created by the stock market crash, the deflation, and the bank failures of 1929-1933. Private investment recovered in a very healthy fashion as Roosevelt's New Deal policies took effect.

The interruption of the Roosevelt Recovery in 1937-1938 is, I think, well understood: Roosevelt's decision to adopt more "orthodox" economic policies and try to move the budget toward balance and the Federal Reserve's decision to contract the money supply by raising bank reserve requirements provide ample explanation of that downturn. And once those two factors had run its course the continuation of Roosevelt's policies was no obstacle to an investment recovery driven by war-related exports monetary expansion produced by capital flight from Europe."

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Sunday, December 7, 2008

Men and women: differing unemployment rates

Losing jobs in unequal numbers: 1,069,000 fewer men are working than a year ago. 12,000 more women are working.

By Robert Gavin, Globe Staff - December 5, 2008

The careers of Neal Boyle and Scott Hacker couldn't be more different. Boyle, whose education ended with high school, worked 20 years crushing rocks at the US Gypsum plant in Charlestown. Hacker, who holds an MBA, changed firms several times as he moved up the management ranks in New England's financial services industry.

But today they find themselves in the same place: laid off and looking for work. And together they represent the face of the current recession, one that is overwhelmingly male.

Men are losing jobs at far greater rates than women as the industries they dominate, such as manufacturing, construction, and investment services, are hardest hit by the downturn. Some 1.1 million fewer men are working in the United States than there were a year ago, according to the Labor Department. By contrast, 12,000 more women are working.

This gender gap is the product of both the nature of the current recession and the long-term shift in the US economy from making goods, traditionally the province of men, to providing services, in which women play much larger roles, economists said. For example, men account for 70 percent of workers in manufacturing, which shed more than 500,000 jobs over the past year. Healthcare, in which nearly 80 percent of the workers are women, added more than 400,000 jobs.

"As the recession broadens, the gap between men and women is going to close somewhat," said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University. "But right now, the sectors that are really getting pounded are intensely male."

The divide is far starker than it was in last recession, when the technology crash battered professional and technical sectors in which women now hold more than 40 percent of jobs. From the beginning of 2001 to the beginning of 2002, the number of employed men declined by about 900,000, while the population of women with jobs fell by about 700,000.

read rest of article here

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Saturday, December 6, 2008

Sen. Bernie Sanders Leads Fight for Job Creation

U.S. Senator Bernie Sanders' Statement on Unemployment Emergency


Unemployment Emergency -- 12/05/2008

Sen. Bernie Sanders called for immediate action to create jobs in the wake of a new report that more than half a million jobs were lost in November, the worst monthly showing in 34 years.

“This is an emergency. We need to jolt our economy back to life. Immediate action is needed to create millions of jobs,” Sanders said. The job losses pushed the unemployment rate to 6.7 percent, the highest rate since the recession of the early 1990s, the Labor Department reported.

As the Center for Economic and Policy Research put it, "This report should eliminate any possible doubts about the seriousness of this downturn. The economy is falling at the sharpest rate since the Great Depression."

Sen. Sanders called on Congress to pass an economic recovery package. While the official unemployment rate is bad enough, Sanders noted that if you include people who have given up looking for work and those who are underemployed, the real number is much worse.

The senator has advocated a stimulus package of at least $500 billion.

“After years of neglect, our top priority should be a major investment in repairing our crumbling roads and bridges, fixing our schools, reviving our railroads, and making a major financial commitment to energy efficiency and sustainable energy. Now is the time to move forward aggressively because each $1 billion investment creates up to 47,000 new jobs,” Sanders said.

“If Congress can fork over $700 billion to rescue the Wall Street fat cats from their reckless gambles, why can’t we put millions of Americans to work rebuilding our country as we address the severe economic crisis we face?”

Sanders opposed the Wall Street bailout and said it has become one of the great outrages of American economic history. The $700 billion bailout legislation is only part of a far greater $8 trillion in taxpayer funds and loan guarantees obligated by the Treasury Department and Federal Reserve.

“Because of the greed of people on Wall Street and at major financial institutions, the Masters of the Universe who have made millions of dollars through their irresponsible behavior have taken the world to the brink of economic collapse.”

Sanders has introduced legislation to stop the Treasury Department from tapping the second $350 billion pot of money in the bailout fund. He has proposed another bill to stop year-end bonuses for the bankers that took taxpayer money, and he also proposed a bill that would limit compensation for any executive of any company that took federal funds to no more than the salary of the president of the United States.

Sanders also said Congress must take a hard look at the manufacturing sector in the United States.

“American corporations must reinvest in America and stop taking away our good-paying jobs and sending them overseas.”

To read the Center for Economic and Policy Research's analysis of the Bureau of Labor Statistics report, click here.

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Thursday, December 4, 2008

New US export: unemployment

Latest World Business News - BusinessDay.co.nz:
The Independent Thursday, 04 December 2008

New US export: unemployment

The Independent Thursday, 04 December 2008

The United States once exported jobs. Now, it is exporting unemployment.

America's deepening recession, which has cost 1.2 million jobs so far this year, is taking a heavy toll worldwide. Shrinking consumer demand for imports and less need for outsourcing by US companies are leading to job cuts at Germany's Porsche and at Chinese businesses that make toys for Mattel.

Economists say worldwide unemployment may increase to a two-decade high as trade and investment ties that have developed during 20 years of globalisation magnify the impact of the US contraction.
Without buoyant economies elsewhere in the world to act as buffers, a longer, deeper slump in the labour market is likely.

In the same way it was supporting economic activity when it was growing rapidly, the recession in the US is going to be a drag on the global economy and is going to reduce employment in US trading partners, says Lewis Alexander, chief economist at Citigroup in New York.

read rest of article here

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Calls for $1 Trillion Stimulus Package Grow as Economy Tumbles

Bloomberg.com: Economy

Calls for $1 Trillion Stimulus Package Grow as Economy Tumbles

By Rich Miller and Matt Benjamin

Dec. 4 (Bloomberg) -- The one thing that isn’t shrinking in the U.S. economy these days is the size of the stimulus package that financial experts say is needed to turn it around.

With automobile sales dropping, payrolls plunging and manufacturing contracting, economists from across the political spectrum are raising the ante on how much the government should lay out. Some are now calling for at least a $1 trillion boost.

Kenneth Rogoff, a Harvard University professor who was an adviser to Republican presidential candidate John McCain, and Joseph Stiglitz, a Nobel Prize winner who served in President Bill Clinton’s White House, are among those who say President- elect Barack Obama should push for a package of that size.

“They need a stimulus of $500-to-$600 billion a year for at least two years to counter what is going to be a collapse in consumption,” said Rogoff, a former chief economist at the International Monetary Fund.

That number may grow. This week brought news that the economy has been in recession for a year. Tomorrow the government will release November employment data, which economists say will show another 330,000 jobs lost, the most in seven years.

“Every day it looks like the stimulus package needs to be bigger,” said Bill Samuel, the lead lobbyist for the AFL-CIO, the largest U.S. labor federation. “You’re talking $500, $600, $700 billion or even more” for a year.

‘Things Are Evolving’

Obama, who has said that enacting a stimulus plan will be his top priority once he takes office on Jan. 20, has himself been steadily increasing the amount he thinks is needed.

Earlier in the presidential campaign, he proposed a package worth $50 billion, then raised that to $175 billion as the election approached. Advisers have since said the program may total as much as $700 billion, although that number, too, may rise.

“Congress should think in terms of $900 billion in 2009, with possibly more in 2010,” said James Galbraith, a self-styled liberal economics professor at the University of Texas in Austin who has talked with the Obama transition team about the issue. “I may be higher than they are at this point,” he said, “but things are evolving.”

Whatever its size, the package is likely to include tax cuts, aid to the states, higher unemployment benefits and increased spending on infrastructure such as roads and bridges.

‘Liquidity Trap’

New Jersey Governor Jon Corzine said Washington needs to step in because the U.S. is caught in a “liquidity trap,” where repeated interest-rate cuts by the Federal Reserve fail to boost the economy because banks don’t want to lend and skittish consumers and companies don’t want to borrow.

“If the government doesn’t operate to fill that gap, we are going to see not only rising unemployment but a shockingly high level of unemployment over the next 12 to 24 months,” Corzine said in Bloomberg Television interview yesterday. He called for a stimulus of “overwhelming force.”

Adam Posen, a former New York Fed official, agreed that’s the lesson to take from Japan’s experience during the 1990s, when it faced a similar situation.

“The stimulus has to come through the fiscal side,” said Posen, who has written about Japan and who’s now deputy director at the Peterson Institute for International Economics in Washington. “A package of 4 percent of GDP, even 5 percent of GDP is not unreasonable over one year.” That would equate to about $500 billion to $700 billion.

Posen said Japan’s economic-recovery packages at times didn’t seem to work because they turned out to be smaller than first announced and were slow in coming.

All About Speed

The Obama team is aware of that problem. “We hear that Japan invested over a trillion dollars in infrastructure and nothing happened,” Vice President-elect Joe Biden told a meeting of state governors on Dec. 2. “Well, it’s all about how rapidly we can get these projects up and running.”

While some conservative economists agree that a big stimulus package is needed, they argue that it should focus on tax cuts, not on increased government spending on infrastructure.
John Makin, a visiting scholar at the American Enterprise Institute in Washington, has advocated a temporary cut in the payroll taxes that help finance Social Security. So, too, has Stanford University Professor Robert Hall, the chairman of the National Bureau of Economic Research committee that calls the beginnings and ends of recessions.

Love That Pork

“Politicians love pork, but maybe they can be pushed toward something better,” Hall said in an e-mail message.

Because the payroll tax is paid by employees and businesses, reducing it would both give consumers more money to spend and businesses more incentive to retain staff, said Mark Bils of the University of Rochester.

Not all economists think fiscal stimulus is the answer to the economy’s ills. “There are other choices,” said Greg Mankiw, a Harvard professor who served as President George W. Bush’s chief economic adviser. Foremost among the alternatives is monetary policy, said Mankiw. The Fed can act to bring down long- term interest rates as well as short-term ones, he said.

Some bond-market investors are also worried about the swelling stimulus and the impact it will have on the budget deficit and ultimately the economy.

“A stimulus of this magnitude helps push government debt as a percentage of GDP closer to dangerous levels, when inflation and interest rates start to rise,” said Thomas Atteberry, who manages $3.5 billion in fixed-income assets at First Pacific Advisors in Los Angeles.

'Enormous Amounts’

Regardless of the risks, that’s where policy makers are heading, said David Rubenstein, co-founder of the Carlyle Group.

“Congress is going to spend enormous amounts of money,” he told reporters in Washington on Dec. 2.

“Initially, people were talking about $150 billion, then $300 billion, then $500 billion then $800 billion. Now people are talking about a trillion-dollar stimulus package.”

To contact the reporters on this story: Rich Miller in Washington at rmiller28@bloomberg.net; To contact the reporter on this story: Matthew Benjamin in Washington at mbenjamin2@bloomberg.net. Last Updated: December 4, 2008 00:01 EST

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Over 1 million U.S. layoffs so far this year

Over 1 million U.S. layoffs so far this year

San Francisco Chronicle

(12-03) 19:28 PST -- Big employers nationwide announced 181,671 layoffs in November, bringing the number of corporate pink slips issued so far this year to more than a million, according to an industry survey released Wednesday.

The survey, by the Chicago outplacement firm Challenger, Gray & Christmas, marks November as the worst month for layoffs since January 2002, when large employers cut nearly 250,000 jobs as the nation was trying to shake off the prior-year recession and the Sept. 11 attacks.

The Challenger survey is not a statistical sample of all employers like the unemployment report that the Labor Department will issue Friday. But it is a good barometer of corporate hirings and firings that has kept a running tally of company-announced layoffs each month since 1993.

The worst annual showing in the survey's 15-year history was the 1.96 million layoffs recorded in 2001. Last year, the report counted 768,264 pink slips.

About half of the job cuts announced in November occurred in the financial sector, where Citigroup alone said it would eliminate 50,000 jobs. So far this year, financial firms have announced more than 220,000 layoffs, more than a fifth of the total announced losses.

read rest of article

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Tuesday, December 2, 2008

Obama & Orzag: Protect Social Security

Dear President Obama and Budget Chief Orszag:

Before You Tackle Social Security and Other Budget Issues...

During the campaign, the presidential candidates, the media and even AARP dished out half-truths about Social Security financing. The misinformation will continue and so will pressure to finance bank bailouts by stealing from social programs. But before cutting anything, the president-elect and his staff ought to follow these ground rules.

1. Keep it straight that Social Security and Medicare are separate. Social Security faces at worst a modest shortfall and not very soon. Medicare will run out of money in a couple of years; its expenditures could exceed those spent on Social Security. Medicare needs major surgery, but, as Henry Aaron of the Brookings Institution reminds us, our entire health care system needs mending. About 46 million people lack insurance and there must be another 46 million struggling to pay premiums and deductibles. We need comprehensive health care reform, but however we handle Medicare, its problems are separate from the Social Security question.

2. Stop saying that Social Security is broken. A mini-funding crisis and political realities in the early 1980s convinced conservatives like Ronald Reagan and Alan Greenspan to agree to changes that have generated huge annual surpluses. The surplus is now about $2.3 trillion and it could reach $7 trillion by 2030.

The system will use the surplus to help pay benefits to an expanding group of retirees. Social Security trustees have predicted that the surplus and current worker payroll taxes will provide full benefits through 2042; then the surplus will be gone and D-Day arrives. At that point, officials claim, people might receive only 75% of expected benefits. But let's be honest about these projections: the trustees use low estimates to forecast economic growth and job creation. Perhaps they think they are acting prudently. But they have been wrong in the past. In the 90s, they told us that D-Day would arrive in 2029; now they say it will come in 2042. The Congressional Budget office predicts D-Day for 2052. It may never occur if we get strong economic growth and decent pay raises.

To make certain that there is no D-Day, Mr. Obama once suggested an idea that seemed fair. Currently workers pay SS taxes only on the first $102,000 of annual earnings. Obama wants to add SS taxes on income over $250,000. Of course the bulldogs of the right-wing propaganda machine will claim that affluent individuals will stop investing or that the sky will fall if we tax the rich. But people who made out like bandits in the last three decades need to pay more.

3. Privatizing even a portion of Social Security is a bad idea. For one thing, as even President Bush admitted during his last assault on Social Security, this would worsen long-term financing problems by diverting funds from Social Security to private accounts. Anyway, partial privatization is just step one in the right-wing plan to demolish Social Security. And that is a sick idea. Americans can risk some of their savings on real estate and stocks, but they need to be able to count on the income floor provided by Social Security. Without Social Security, three times as many seniors would be poor as are poor now. Aren't the dangers of privatization obvious in this Age of the Financial Meltdown?

4. There is something that could break the bank on Social Security. The fund's surplus is not stashed under the national mattress; the system loans money to the federal budget and that helps government finance its deficits. But here is the catch: eventually the feds have to repay what they owe Social Security.

In his last attack on the system, President Bush tried to scare people by suggesting that the feds might renege on what they owe Social Security. Obama and other politicians need to tell us whether they agree with Bush. Mr. Orszag seems to. Does Obama believe that the feds need not repay the trillions they have borrowed from Social Security? If yes, why did people pay into the system to accumulate a reserve in order to protect benefits? And while we're at it, will the government renege on federal bonds held by businesses here and around the world?

The feds need to come up with money to repay Social Security, but they need dollars for all kinds of things. The government just registered a record $455 billion deficit, none of it from Social Security. As anti-recession spending continues and tax receipts fall, the problem will grow. The president-elect will be pressured to cut social programs in order to pay for the bank bailouts. I urge Obama not to do the dirty work of right-wing spendthrifts who push up federal deficits and then tell us: "See, we cannot afford new social programs and we must cut Social Security."

I urge Obama to remember that the deficit hawks in his administration did not elect him. As President, Obama should forge ahead with health care reform and job creation. He can get many billions by letting Bush's tax cuts expire. (The richest 400 Americans have a total wealth of $1.6 trillion; about half was swiped from the common treasury during the Bush years; it is time we get it back.) Furthermore, centrists and liberals must tolerate deficits if that is necessary to support new jobs, universal health insurance, and a secure safety net. Why let right wingers, whose ideology led to the current economic crisis, define progressive social policy? Why agree with this: deficits are fine if they accompany an economy that set records for lousy job creation and weak income growth, they are fine to bail out the Robber Barons, but they are bad for programs that improve life for the bottom two-thirds of all American households?

Frank Stricker is Emeritus Professor of History at California State University, Dominguez Hills, and an Advisory Board and Executive Committee member, National Jobs for All Coalition. His book, Why America Lost the War on Poverty–and How to Win It, appeared in 2007.
E-mail: frnkstricker [at] aol.com

Editor's note: This op-ed was submitted by Prof. Stricker to The Drive for Decent Work blog. For more information on Social Security, please visit the National Jobs for All Coalition's Social Security page for fact sheets and educational materials. The coalition believes that "the best insurance for Social Security is full employment--jobs for all at decent pay."

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Underemployment Surges in Alabama

Underemployment still issue in Wiregrass (Dothan Eagle, Dothan, Alabama, 12/2/08)

A college degree does not guarantee a job. Just ask Ellen Bura. After earning her bachelor of science degree in business administration in December of last year, Bura expected to face some difficulty in her hunt for administration jobs, especially given the country’s economic downturn. She just didn’t expect to be shut out completely.

“I knew it was going to be tough, but I didn’t think it was going to be as hard as it was,” said Bura, 23, who now works as a teller at Regions Bank in Dothan.

“It was hard to even get an interview. I would get letters back saying I’m not qualified and won’t even get an interview, or the position’s been filled.”

Her problem is not an uncommon one.

According to Sam Addy, director of the Center for Business and Economic Research at the University of Alabama, 24.2 percent of full-time working Alabamians are underemployed.

Addy is completing a study on underemployment for the state after tracking underemployment numbers for three years. He defines underemployment as the number of full-time workers whose skills and education are not utilized properly in their current jobs.

Scott Crews, 24, works as a server for Santa Fe Cattle Co. Steakhouse in Troy after graduating last December with a degree in sports and fitness management. He blames his own procrastination and the limitations of his degree for his difficulties finding a job in his field.

“I was not prepared for a job right when I got out, because I was still debating whether to go to grad school, and I didn’t have a job lined up,” Crews said. “I went to a couple of job fairs trying to find a job that I could use my degree for, but not a lot of job fairs have occupations that are related to my major. It’s kind of a new skill, since the major’s only about 10 years old.”

Crews’ story is similar to that of Matt Reynolds, though their degrees are completely unrelated.Reynolds graduated in May 2007 with a bachelor of science degree in biology. He, too, waited until after graduation to begin his job search. He quickly discovered he’d need more school before finding a biology-related job.

“I honestly wasn’t that aggressive (before graduation),” said Reynolds, 26, who now works as a teller at Redstone Federal Credit Union in Huntsville. “I wish I had started earlier. Looking for a job is not a very ego boosting experience. I worked at a restaurant for a while before I found the job I have now. I only applied for science-type jobs, but when I didn’t hear back, I started applying anywhere.”

Addy says underemployment can be caused by an array of issues.

“The major cause of underemployment is the innate productivity growth, because people have the ability to learn,” Addy said. “When people learn at their job, they tend to do things better and quicker, often to maximize their leisure time. Others are underemployed because they live in places where there is a lack of job opportunities.”

“Some are underemployed because of retirement or disability. They adjust to their disability status and become less productive,” he added. “Others are underemployed by choice, because they take part-time jobs, maybe because a spouse takes a really, really good job. Others are forced to be underemployed because of child care and other family care-type situations.”

For some, it comes down to surviving until they can catch a career-related break... read rest of article here

See also: 2007 map of Underemployment in Alabama, Center for Business and Economic Research, University of Alabama

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Don't Forget Older Workers in Job Creation Plan!

Orlando Sentinel: Here's why older Americans need a place in Obama's New Deal

As President-elect Barack Obama reinvents President Franklin D. Roosevelt's New Deal with his jobs and economic-stimulus package, I urge him to consider older Americans in that deal, as Roosevelt did. Not with a handout, but with opportunity.

Jobs programs created during the Great Depression provided aid to targeted groups. The Civilian Conservation Corps employed hundreds of thousands of young, out-of-work laborers, while the Works Progress Administration assisted millions more, from white-collar workers to the artists who epitomized the WPA era.

One segment of the population especially vulnerable to today's economic shocks and job losses includes workers older than 45.

Not only do unemployed older Americans, by definition, have less time to recover and rebuild for retirement, those in the 45-to-64 age bracket often support children and their elderly parents simultaneously. Still others older than 65 are finding they cannot retire or must rejoin the work force. Though the reasons are varied — failed pensions, shrinking 401(k)s, the collapsing housing market or inadequate savings — the fact is the baby-boomer generation in particular is woefully unprepared for its later years.

According to the Florida Legislature's Office of Economic and Demographic Research, Floridians older than 45 are projected to comprise 44.2 percent of the state's population by 2010 — four percentage points higher than in 2000. That's 8.5 million people hitting the so-called "gray ceiling," the time when finding a good job becomes noticeably more difficult.

Rather than describe themselves as unemployed, older Americans often use the face-saving excuse of claiming they are retired. In actuality, many belong to the "discouraged worker" category, a demographic excluded from official government unemployment rates.

Ironically, though older job applicants are often less valued by employers because of health-insurance costs and the perception that they are less-technically proficient or affordable than younger workers, they have much to offer in tested skills and life experience. Today's older workers are also better-educated than those of past generations. This intellectual capital, a valuable resource to a nation seeking to rebuild itself, is in danger of either going to waste or being lost all together.

The creation of a jobs program that enlists older Americans could help alleviate several problems.

First, the U.S. could use this "army" of mature workers to take on tasks for which there is an urgent, temporary need or a long-term shortage. Specialized teams could perform a variety of services: education support, health-care administration, post- FEMA disaster follow-up and stateside support duties for the military, allowing soldiers to be deployed to critical areas where their capabilities are most in demand.

Workers in the program could be given pay, which, while probably not matching their former incomes, would be an improvement over the minimum-wage positions so many feel forced to accept. Retraining for new careers could help them find meaningful, quality jobs once the program ended.

Second, older workers who do not yet qualify for Medicare, often go uninsured because private insurance is prohibitive in cost. If health insurance were offered to this work force, particularly preventive health care, it might ultimately decrease the strain on Medicare in the years ahead.

Finally, in exchange for their service to the country and their communities, members of the corps could be offered an option wherein their contributions to Social Security could be matched or increased above normal levels, meaning that when they retire, they would be able to draw on a larger monthly income, and thus not be reduced to poverty or substandard living conditions.

For years, Congress and the media have expounded on the threat America's 70-million-plus baby boomers pose to our country's economic security as they retire. Instead, let's hear about how this vital demographic, which revolutionized America during the 20th century, can continue to produce positive change well into the 21st.

Claudia O'Keefe lived in St. Petersburg for seven years before moving to Albuquerque, N.M., to attend school. She plans to return to Florida.

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