January 23, 2014
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The U.S. economy is still weak, with 7 percent unemployment, many millions more underemployed and fewer people employed in November than there were six years ago.
At the same time – and not unrelated – we are still devolving along a path toward increasingly ugly inequality, with 95 percent of the income gains since the Great Recession going to the top 1 percent of the income distribution.
Meanwhile, the crisis of global climate change is moving toward more irreversible catastrophic damage each year that the United States, which is responsible for more of the cumulative carbon emissions than any other country and procrastinates in making the necessary changes to reduce fossil fuel consumption.
There are feasible policy changes that can address all of these problems – and we don’t have to sacrifice employment or a more just and decent society in order to make progress on climate change. Here are five of them:
- A carbon tax: This one is so simple that it even gets overwhelming majority support among economists. If we tax the use of fossil fuels, less will be used and production and investment will shift to lower carbon dioxide and more renewable forms of energy like solar. We can even use the revenue to fund alternative energy sources – as in France – or if that is not politically feasible, simply refund the money to the public or cut other taxes as in the Canadian province of British Columbia.
- Pursue full employment: We had full employment in 2000, when unemployment was 4 percent, and it didn’t lead to inflation or anything bad. In addition to reducing the suffering of millions of unemployed and their families, full employment is what enables workers to bargain for their share of the productivity gains that have, over the past 35 years, been withheld from the majority of the labor force. This means we have to keep the Fed’s quantitative easing and near-zero interest rates as long as necessary. But that has not been enough; the economy is still short more than 8 million jobs. So we also need expansionary fiscal policy, which means federal spending that creates employment.
- Labor law reform: Another main reason for the Latin Americanization of the United States, in term of income distribution, is the decline of collective bargaining. Only 11.3 percent of workers are in unions today, as compared with 35 percent in the 1950s. President Obama pledged in his first campaign to support The Employee Free Choice Act, which would have restored some of workers’ rights to collective bargaining that have been lost over the past three decades. This will have to be restored if we are to reverse the country’s widening inequality.
- Public Investment in Energy: The federal government can retro-fit its own buildings for energy savings of about 30 percent, and subsidize others. A “smart” electricity grid can yield a lot of energy savings, and so can investment and subsidies to mass transit. These can be part of the expansionary fiscal policy needed to create jobs.
- A Financial Speculation Tax: A tiny tax along the lines of 3 cents per $100 – as currently proposed in Congress – on financial transactions such as stocks, bonds, futures and options – would raise tens of billions of dollars annually while reducing speculative, destabilizing trading. It has popular support and it wouldn’t hurt ordinary investors who are, for example, saving for their retirement.
Some of these proposals may seem far from the political agenda, but remember that the Federal Reserve’s quantitative easing to stimulate the economy was uncharted territory until they actually did it in 2008. It was accepted by all but the far right; and it has helped. The public is more than ready for new economic policies to civilize this country and save the planet from climate disaster.
Mark Weisbrot is a co-director of the Center for Economic and Policy Research.