U.S. ECONOMIC HARDSHIP & What to Do About It

By Alan Shapiro

 

To the Teacher:

Economic hardship continues for millions of Americans. The first student reading below includes portraits of four struggling Americans as well as an alarming report on hunger from Feeding America. The second reading presents some staggering budget and deficit figures, an outline of where budget money goes, and President Obama's explanation of the nation's financial situation. The third reading considers what needs to be done, especially for job creation.

Discussion questions and suggestions for further inquiry and citizenship projects follow.

 


Student Reading 1:

Real people: the jobless and the hungry

Six months ago US officials announced the end of the recession. But while the big banks that had been bailed out by US taxpayers had speedily returned to making huge profits, millions of ordinary Americans were still out of work. Many more millions needed help putting food on the table.

Four jobless Americans

Curtis McKenzie, 40, of Tulsa, Oklahoma, "has been out of work since he was laid off from a $60,000-a-year job at a small technology company last March," reported Paul Wiseman in USA Today (2/8/10). "'The only jobs I have been offered won't even allow me to cover bills,' he says. 'You build a lifestyle around the job you think you're going to have forever.' McKenzie, his wife and two boys don't go out much anymore. They think twice about visiting friends to watch football, which would mean spending money on gasoline, beer and snacks.

"Millions of Americans are sharing McKenzie's pain: In January, a record 6.3 million people — 41.2% of the unemployed — had gone without jobs at least 27 weeks. The average unemployed American has been jobless more than 30 weeks, another grim record, the Bureau of Labor Statistics reported on Friday….

"The Economic Policy Institute figures there are 6.4 jobless people for every job opening.

"Rob Phipps, 49, of Sandwich, Ill., thought he had braced himself for the worst. When he lost his job as a software engineer for a big telecommunications company, he figured it would take six to 12 months to find another job. That was 17 months ago. He gets up every morning and looks for work.

"Phipps keeps busy by reading up on the latest technology, watching movies and playing Scrabble with his wife....You start climbing the walls. You've been solving problems for 25 years, and your mind is sharp. You want to get back to work." (Paul Wiseman, "Long-term unemployed still wait for recovery to arrive," www.usatoday, 2/8/10)

"'I lost my job in March, and from there on, everything went downhill,'" said Vicky Newton, 38, of Mount Pleasant, Michigan, a single mother who had been a customer-service representative in an insurance agency." (New York Times, 12/14/09)

"'After struggling and struggling and not being able to pay my house payments or my other bills, I finally sucked up my pride,' she said in an interview….'I got food stamps just to help feed my daughter.''"

"Tammy Linville, 29, of Louisville, Kentucky, said she lost her job as a clerical worker for the Census Bureau a year and a half ago. She began seeing a therapist for depression every week through Medicaid but recently has not been able to go because her car broke down and she cannot afford to fix it.

"Her partner works at the Ford plant in the area, but his schedule has been sporadic. They have two small children and at this point, she said, they are 'saving quarters for diapers. Every time I think about money, I shut down because there is none,' Ms. Linville said. 'I get major panic attacks. I just don't know what we're going to do.'"

(Michael Luo and Megan Thee-Brenan, "Poll Reveals Trauma of Joblessness in US," New York Times, 12/14/09)

Hungry people
Feeding America, a national network of food banks, conducted a study which found that 37 million Americans, including 14 million children, are now getting emergency food help from agencies affiliated with Feeding America. The study on interviews with 61,000 clients and surveys of 37,700 feeding agencies.

The new report "shows that hunger is increasing at an alarming rate in the United States." Feeding America food banks are "feeding 1 million more Americans each week than we did in 2006."

Almost half of those receiving food from this network "report having to choose between paying for utilities or heating fuel and food. More than one in every three say they are forced to choose between paying for rent or a mortgage and food, or between paying for medical bills and food, or between transportation and food... Nearly half of our adult clients report that they have unpaid medical and hospital bills." (www.feedingamerica.org)

 

For discussion

1. What questions do students have about the reading? How might they be answered?

2. What are the causes of the joblessness? Why do people need food from food banks? If you don't know, how might you find out?

 


Student Reading 2:

President Obama's explanation of the financial situation

Some trillion dollar numbers
$3,800,000,000,000: This is the total amount to be spent in President Obama's budget for the 2011 fiscal, or financial year (October 1. 2010 through September 30 2011).

Obama told reporters on February 1: "Our fiscal situation remains unacceptable." A few additional figures help to explain why.

  • $1,560,000,000,000: This is the budget deficit—the gap between revenue and spending in the new budget.
  • $1,300,000,000,000: This is the gap projected for the following year that forces the government to borrow more than forty cents for every dollar it spends.
  • $12,400,000,000,000: This was the borrowing authority approved by Congress on December 24, 2009.
  • $14,300,000,000,000: This is the new borrowing authority approved already this year by Congress because what it approved last December is no longer enough.

The people of the United States are in debt to the tune of $14.3 trillion, more of it to China than to any other nation. The Obama administration predicts this debt will continue to rise for the next 10 years.

There is general agreement that the biggest driver of budget deficits is the relentlessly rising costs of healthcare. But Congress has yet to do anything about these rising costs. A rule permitting a minority of 41 senators to block passage of any legislation—even if all 59 of the remaining senators approve of it—has resulted in a frequently impotent U.S. Senate. This means that it has been extraordinarily hard to take legislative action to cut healthcare costs and to pass a 2,400-page budget.

Trillion-dollar "untouchable" budget items
Many parts of the US federal budget are very hard to cut. Among them.

1) National defense and the wars in Iraq and Afghanistan: $741 billion.

This figure does not include additional hundreds of billions for defense-related programs including:

  • Homeland Security
  • care of wounded veterans
  • veterans' pensions
  • nuclear weapons stockpile maintenance and development
  • military aid to allies
  • interest on national debt for past wars
  • funding for secret defense projects.

2) Medicare: $489 billion and Medicaid: $290 billion

Medicare is the government health insurance program for about 45 million Americans aged 65 and over and others with disabilities.

Medicaid is a program administered by states (with support from federal tax dollars) that provides health insurance for low- income Americans with children and for those who are pregnant or disabled.. The Children's Health Insurance Program (CHIP), also a federal-state funded program, costs an additional $13.2 billion annually.

3) Social Security: $617 billion

Social Security payments go into the Social Security trust fund and are not part of the government's general fund, which comes from taxes. For years Americans have been paying more into the Social Security trust fund than is being paid out. The government has been "borrowing" this "extra money," which then becomes part of the budget deficit, but is owed to the Social Security trust fund, not foreign investors.

4) Interest on national debt: $499 billion

The rest of the federal budget is for "discretionary" spending: education, medical and scientific research, school meals, low-income housing assistance, child-care assistance, help in paying home energy bills, and other programs, including job stimulation and extended unemployment insurance.

Obama's budget analysis
"It's a budget that reflects the serious challenges facing the country," President Obama said on February , 2010. "We're at war. Our economy has lost 7 million jobs over the last two years. And our government is deeply in debt after what can only be described as a decade of profligacy.

"The fact is, 10 years ago, we had a budget surplus of more than $200 billion, with projected surpluses stretching out toward the horizon. Yet over the course of the past 10 years, the previous administration and previous Congresses created an expensive new drug program [as part of Medicare], passed massive tax cuts for the wealthy, and funded two wars without paying for any of it—all of which was compounded by recession and by rising healthcare costs. As a result, when I first walked through the door, the deficit stood at $1.3 trillion, with projected deficits of $8 trillion over the next decade.

"If we had taken office during ordinary times, we would have started bringing down these deficits immediately. But one year ago, our country was in crisis: We were losing nearly 700,000 jobs each month, the economy was in a free fall, and the financial system was near collapse. Many feared another Great Depression. So we initiated a rescue, and that rescue was not without significant cost; it added to the deficit as well.

"One year later, because of the steps we've taken, we're in a very different place. But we can't simply move beyond this crisis; we have to address the irresponsibility that led to it. And that includes the failure to rein in spending, as well as a reliance on borrowing — from Wall Street to Washington to Main Street—to fuel our growth. That's what we have to change. We have to do what families across America are doing: Save where we can so that we can afford what we need."

Where to cut?
The Obama budget freezes some domestic spending for three years to reduce the deficit. It reverses a Bush administration tax cut for wealthy Americans; ends subsidies for wealthy farmers and oil and gas companies; and ends tax breaks for multinational corporations that ship jobs overseas and make profits there to avoid paying US taxes. The budget also axes funding for NASA's plan to send astronauts to the moon. Such cuts save only about $250 billion in a deficit of trillions.

Senators Saxby Chambliss, a Georgia Republican, and Blanche Lincoln, an Arkansas Democrat, object to farm subsidy cuts. Both Chambliss and Lincoln come from states with voters who profit from farm subsidies. This is "a telling illustration of why it is so hard to control federal spending," Carl Hulse wrote in The New York Times. "Every federal program has a constituency, and even lawmakers who profess to be alarmed by rising deficits will go to the mat to preserve money that provides jobs and benefits to their constituents." ("Spending Cuts Meet Selective Support," New York Times, 1/7/10)

For discussion

1. What questions do students have about the reading? How might they be answered?

2. How would you explain why certain budget items are regarded as "untouchable"? Should they be? Why or why not?

3. What is a major factor in the legislative failure to curb rising healthcare costs? Why?

4. The president said that the country is suffering from "a decade of profligacy." According to him, why? What acts of "irresponsibility" does he cite? If you need more information, how might you find it?

5. What acts of the Bush administration does Obama criticize? Are these fair criticisms? What do you think and why? If you need more information, how might you find it?

6. What makes spending cuts so difficult to achieve?
 


Student Reading 3:

Competing views on what to do

Close the deficit
The budget revealed that deficits would continue to rise for at least 20 years, "potentially threatening the country's economic stability." (www.washingtonpost.com, 2/2/10)

"More spending, more taxes and more debt," said Senate Republican leader Mitch McConnell (Kentucky) of the budget. Republican Senator John McCain (Arizona) said, "Just a three-year spending freeze, frankly, won't do it, although I think it's good to do."

Jeffrey Pfeffer wrote in Newsweek, "There are currently 14.8 million unemployed, and when you count 'discouraged workers' (who've given up on job seeking) and part-time workers who'd prefer a full-time gig, that's another 9.4 million Americans who are 'under-employed.'" In the same publication, Evan Thomas said, "'Jobs, jobs, jobs!' is that standard political refrain. But Obama failed to explain that there is only so much the federal government can do to create jobs, and it's already done it." Newsweek, 2/15)

Provide jobs
New York Times op-ed columnist Bob Herbert disagrees. He has called repeatedly for the Obama administration to worry less about the deficit and more about the suffering of the jobless. He has focused on "the structural employment problems in the US" He calls for "a quality public education for the next generation of American workers, scientists, artists and entrepreneurs…a new saner, more sustainable economy…powered by cleaner fuels." Herbert also notes that the American Society of Civil Engineers has warned of "broken water mains, gridlocked streets, crumbling dams and levees, and delayed flights" because we have failed to pay to repair our infrastructure. ("Time Is Running Out, New York Times, 2/6/10)

"If anything, deficits should be bigger than they are because the government should be doing more to create jobs," Nobel prize-winning economist Paul Krugman echoed. "The deficit threatens economic recovery, we're told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren't stated as opinions….Instead, they're reported as if they were facts, plain and simple.

"Yet they aren't facts," and are "much less frightening than the public is being led to believe," Krugman wrote. He said, "many economists take a much calmer view of budget deficits than anything you'll see on TV."

The Keynes Prescription
When families lose jobs, they sensibly move to cut spending, save, and use money only for essential items. But John Maynard Keynes, an influential 20th century British economist, said governments aren't like families and should take very different actions in a downturn.

In The General Theory of Employment, Interest and Money, published during the Great Depression of the 1930s, Keynes wrote that hard times crippled businesses just as they caused families to suffer. He argued that governments should fill the business role during such hard times. Businesses, he maintained, should borrow to put people back to work on public works projects and temporarily forget about balanced budgets.

President Franklin D. Roosevelt's New Deal administration in the 1930s largely followed this advice. The administration created many public employment projects. One of them, the Works Progress Administration (WPA) created 8 million jobs to build or repair schools, hospitals, parks and highways. The WPA also hired writers, artists, and entertainers—many of whom created art that had a lasting impact.

The Obama administration has not followed in Roosevelt's path. "This isn't even within hailing distance of where the current administration is now as it frets about the deficit and pledges to freeze domestic spending," wrote Steve Fraser, a labor and community studies researcher. ("The New Deal in Reverse," www.tomdispatch.com, 2/11/10)

In 1937, when unemployment began to fall, FDR decided that big federal spending was no longer needed and reduced it. The resulting business downturn and renewed joblessness meant a year-long recession that economists today regard as one of that president's biggest mistakes.

Do something, anything, to create jobs
Economist Paul Krugman, like Keynes, argues against "deficit hysteria." Washington, he said, gets "its priorities all wrong: all the talk is about how to shave a few billion dollars off government spending, while there's hardly any willingness to tackle mass unemployment. Policy is headed in the wrong direction—and millions of Americans will pay the price." ("Fiscal Scare Tactics," New York Times, 2/5/10)

Dean Baker of the Center for Economic Policy Research agrees. Keynes, he says, taught us that in an economic downturn, "The government has to do something—anything—that would increase demand for goods and services…. [But] deficits have become an overriding concern even as the unemployment rate hovers in the double-digits, just as was the case in the Great Depression. Politicians think that we are somehow helping our children by leaving their parents out of work rather than issuing more government debt." ("No Way Out: The Political Constraints Obstructing a US Recovery")

Baker also argues that we could "adopt policies that encourage people to work fewer hours. Germany and the Netherlands have aggressively pushed 'work-sharing' policies that have kept unemployment from rising in the downturn. Thanks to work-sharing, the unemployment rate in the Netherlands is less than 4.0 percent...." ("The Second Great Depression Bogeyman," (www.cepr.org, 2/1/10)

Meanwhile, voters want it both ways, according to New Yorker financial writer James Surowiecki: "People want the government to help provide jobs, but they also want it to cut the deficit….They want the government to tighten its belt and fight unemployment at the same time….If Democrats pass a stimulus package, they'll be lambasted for increasing the deficit; if they don't pass a stimulus, they'll be attacked for not caring about jobs." (The New Yorker, 2/15 & 22)

Key Democratic and Republican senators achieved rare bipartisan agreement in mid-February on an $85 billion plan. It included tax breaks for businesses that hire workers who have been unemployed for at least 60 days and increased public works projects. But about half of the bill had nothing to do with putting people back to work. Urged by Democrats dissatisfied with this result, Senate majority leader Harry Reid cut the plan to $15 billion. Now Republicans were dissatisfied.

Even if it passed, however, the legislation would create no more than 250,000 jobs, a tiny fraction of the number needed. It does nothing to help state and local governments already forced since 2008 to cut 151,000 jobs because of sharp drops in tax revenue. It does not include an extension of unemployment benefits, the only income for many families today.

Dissatisfaction with Congress' inaction is widespread. A CBS/New York Times poll in early February 2010 found that 81% of respondents do not think that legislators running for another term of office later this year should be reelected. Only 5% think they should. Only 15% approve of the job Congress is doing, while 75% disapprove.

For discussion

1. What questions do students have about the reading? How might they be answered?

2. Americans seem to agree that 1) the US deficit cannot keep rising forever, that there must be plans for its reduction and 2) government action to put people back to work is essential. Why does Surowiecki think these requirements are in conflict?

3. Has the government already done all it can to create jobs, as Evan Thomas wrote? Why or why not? If you don't know, how might you find out?

4. What is Keynes' theory about what should be done when an economic downturn throws many people out of work? Why is this theory the opposite of what seems to be common sense? What supporting evidence is there for Keynes' theory? Why might some oppose it?

5. Is Obama employing Keynesian methods? If so, how and to what extent? If not, why not? If you don't know, how might you find out?

6. How would you explain the very low approval ratings for the job Congress is doing?

 


For inquiry

Consider with students possible small-group and independent investigations of issues and questions raised during class discussion of the readings. The class might also consider an investigation into the economic situation in their own town or city. For instance:

  • What is the local unemployment rate?
  • What is known about how long individuals have been jobless?
  • How many people are working part time but want full time work? How many have given up looking for work?
  • What evidence is there that some people need food?
  • How many home foreclosures have there been?
  • How many homeowners are "underwater"?
  • What town or city programs are there to help the jobless, those needing food, those who have been foreclosed or are facing foreclosure?

Sources of information include: the local newspaper, radio station, TV channel; town or
city records and websites; local nonprofit organizations; interviews with reporters and officials.

 

For citizenship

What might be done in the students' community to help others during this longlasting economic downturn?

After investigating this question, students might develop an action program. See "Teaching Social Responsibility" in the "Ideas and Essays" section of TeachableMoment for suggested approaches.

 

 

 

This lesson was written for TeachableMoment.Org, a project of Morningside Center for Teaching Social Responsibility. We welcome your comments. Please email them to: lmcclure@morningsidecenter.org.