Wednesday, November 28, 2012

Fwd: qotd: Health care and education are key to economic recovery

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Subject: qotd: Health care and education are key to economic recovery
Date: Wed, 28 Nov 2012 07:47:06 -0800
From: Don McCanne <>
To: Quote-of-the-Day <>

New America Foundation
November 2012
Economic Recovery and Social Investment
A Strategy to Create Good Jobs in the Service Sector
By Robert Kuttner

Today's prolonged economic slump is fundamentally different from an
ordinary recession. In the aftermath of a severe financial collapse, an
economy is at risk of succumbing to a prolonged deflationary undertow.
With asset prices reduced, the financial system damaged, unemployment
high, consumer demand depressed, and businesses reluctant to invest, the
economy gets stuck well below its full employment potential.

What's needed is aggressive fiscal policy – and not the kind of fiscal
policy promoted by the austerity lobby to "restore confidence" and allay
supposed fears of inflation. The problem isn't low confidence in
deficit-reduction. Banks are now sitting on about $1.8 trillion in cash
or government securities – because they can't imagine where to
profitably invest it. Businesses are delaying investment in expansion
not because they are fretting about deficit projections for 2023. They
are waiting to see customers with money to spend, and general austerity
will only reduce that spending power.
But where should this fiscal policy be directed? One, obviously, is
investment in a green economy and modern public infrastructure. The
other – too little appreciated – is increased outlay in human services,
of the sort that can create good, non-exportable jobs and improve the
life prospects of the next generation, as well as provide stable,
counter-cyclical sources of employment and demand. Government also has
the power to structure other service-sector work as decent jobs.

Public investment, including public investment in the service sector,
can help the economy climb out of the current deflationary trap – and
establish a foundation for a stronger middle class in the future.

The Case for Investing in People
The economic collapse triggered by the financial crisis that exploded in
September 2008 represented the collision of three trends. One was the
license given to speculative finance resulting from increasingly
reckless deregulation.

The second trend was the worsening income distribution.

Third, since the early 1980s, the economy has been losing good, middle
class jobs, especially in manufacturing.

So where will the sources of increased demand and good, middle class
jobs come from? One obvious candidate is the creation of good,
professional service jobs improving the quality of education and care
for the young, the old, and the sick.

We are shifting irrevocably to a service economy. But there are
political choices to be made (or evaded). One path leads to an economy
of minimum-wage fast food workers and security guards, many of them with
temporary or part time jobs, on one extreme – and billionaire hedge fund
managers and takeover artists, on the other. The other leads to a
commercial sector of decent wages and terms of work and a human service
sector of middle class professionals that serve social needs – which in
turn make for a more productive economy and decent society.

Good Human Services as Social Investment and Economic Stimulus

Millions of jobs serving the very young, the very old and the very sick
are low-wage jobs. This is a social decision, not the product of private
supply and demand, because the qualifications and earnings for these
occupations are set socially. A person caring for three-year-olds, for
instance, can be a glorified baby sitter with minimum certification as a
day care worker – or a well trained professional in child development.
The job can pay minimum wage, or it can be a middle-class occupation and
career. This social choice governs not just the quality of the job, but
the quality of the early education given – especially to young children
who begin life with fewer inherited advantages than the children of the
professional class and the business elite.

A nursing home worker, likewise, can be a nurse-aide making $8 an hour,
or a licensed practical nurse or trained recreation aide earning almost
twice that, closer to $30,000 a year. Well-qualified and trained nursing
home personnel produce not just better career opportunities and economic
stimulus, but better quality of life for the elderly. Having competent
staff is more efficient in the long run because there is less turnover,
less need for outlays on recruitment, better morale, and fewer incidents
of neglect that require far more expensive medical treatment.
I've done a rough, order-of-magnitude calculation and found that for an
annual expenditure of about $100-$150 billion (or under one percent of
GDP), we could set a national policy goal of guaranteeing that all human
service jobs are professional jobs that pay at least $25,000 a year
(which is itself a lower minimum bar than others have suggested). This
requires professionalizing some occupations, as well as universalizing
the availability of some categories of woefully underfunded services
such as early education. As long as the current deflationary economy
persists, this funding could come from additional government borrowing.
As the economy recovers thanks to the additional stimulus, the normal
increase in revenues could pay for part of the cost, supplemented by
increased progressive taxation.

One of the great problems of the manufacturing economy, and of some
services such as software engineering, accounting, call center work, and
repair of jet engines, is that globalization allows these jobs to be
done offshore by lower-paid workers. Human service jobs, by contrast,
must be performed at home. If we have a national policy of guaranteeing
that they are good jobs, there is no risk that they move overseas. We
get the quadruple benefit of macro-economic stimulus, better jobs,
better quality services, and (in the case of the young) improved
lifetime opportunity and productivity.

The shift to upgrading work in the service sector, especially work in
the human services, can be part of a deficit-financed macro-economic
recovery strategy to address the nation's current unemployment crisis
and slow recovery. But this is not enough. It should also be part of a
long-term effort to upgrade both the quality of work and of social
services. The mistaken slogan of the February 2009 Recovery Act was
"timely, targeted, and temporary." That precluded any medium or long
term planning. To adapt to the needs of an economy of the future,
efforts to improve service sector employment need to be planned,
pro-active, and permanent.

Comment: Framing is important. Right now our nation's fiscal problems
are being framed as a budget deficit requiring austerity measures such
as a decrease in spending on Medicare and Medicaid. Instead, we should
be framing the problem as a need to improve our economy by establishing
policies that promote and expand our service economy, especially in
education and health care, and, of course, investing in a green economy
and in public infrastructure.

What does this have to do with single payer? Simply that an expanded and
improved Medicare program covering everyone would provide an excellent
avenue to expand and improve the type of health care service jobs that
are discussed in this paper.

Robert Kuttner's 11 page paper on economic recovery and social
investment should be downloaded, read in its entirety, and shared with
others - especially members of Congress who can't seem to get the
framing right.

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