Robert A. Levine
Even as the economy appears to be emerging from its doldrums, several factors are threatening to
derail the recovery. Since movement up or down will greatly influence the presidential and congressional races eight months hence, any action taken to bolster the economy has political overtones.
Rising gas prices is an obvious fly in America’s ointment that economists have long been warning about. While the effect of high prices has been moderate so far, future increases could throw the nation back into recession. Unfortunately, prices are dependent on unpredictable geo-political factors, most of which are beyond America’s control. Included is the West’s confrontation with Iran over its nuclear program and actions that Israel may or may not take. Iran’s recent threat to close the Straits of Hormuz caused an immediate spike in oil prices and they have remained elevated since. The situation in Syria could also spiral out of control, leading to a wider conflict in the Mideast, with neighboring states becoming involved on both sides. Nigeria, a major oil supplier, remains volatile as well, with an Islamist insurrection in the country’s north and continued unrest in the oil producing delta.
Since the start of the recession, an important element that has been a drag on the economy and stalled recovery has been the layoffs of public service employees by state and municipal governments because of reduced revenue. Economists believe this has a multiplier effect, with 2.4 jobs lost for each public sector layoff according to the Center for Public Policy Priorities. An average of 22,000 public sector workers lost their jobs every month through 2011, with a total of over 270,000 teachers and other workers being laid off. Even as private companies have ramped up employment, the shedding of jobs by state and local governments has kept unemployment levels high and made recovery more difficult. While the stimulus package from the federal government in 2009 did help preserve some of these jobs for a period of time, a considerable number of layoffs of teachers, policemen, firemen, sanitation workers, administrative personnel
and so forth, did occur. Many of these jobs have not returned because state and local tax revenues have not rebounded to the levels prior to the recession. State and local governments have also cut spending on goods and services in light of their revenue shortfalls.
Aside from the immediate effect, the loss of teaching positions will be particularly injurious to the nation’s economy in the future, since an educated citizenry is necessary to compete in today’s global world. America’s students are currently behind other nations in terms of educational proficiency and this will only worsen over time if class size increases and there are not enough teachers. And preserving and expanding the nation’s infrastructure falls mainly on the shoulders of state and local governments, with funds coming from Washington. Sadly, this is another area that has been neglected and will impact the nation in the future.
While this recession has been deeper than past downturns, the lag in recovery has been partially due to a focus on austerity by politicians at all levels combined with uncertainty over rising gas prices. Increased spending on education and infrastructure should be a priority for the nation to maintain and enhance its competitive position.
Resurrecting Democracy
www.robertlevinebooks.com3-16-12
Even as the economy appears to be emerging from its doldrums, several factors are threatening to
Rising gas prices is an obvious fly in America’s ointment that economists have long been warning about. While the effect of high prices has been moderate so far, future increases could throw the nation back into recession. Unfortunately, prices are dependent on unpredictable geo-political factors, most of which are beyond America’s control. Included is the West’s confrontation with Iran over its nuclear program and actions that Israel may or may not take. Iran’s recent threat to close the Straits of Hormuz caused an immediate spike in oil prices and they have remained elevated since. The situation in Syria could also spiral out of control, leading to a wider conflict in the Mideast, with neighboring states becoming involved on both sides. Nigeria, a major oil supplier, remains volatile as well, with an Islamist insurrection in the country’s north and continued unrest in the oil producing delta.
Since the start of the recession, an important element that has been a drag on the economy and stalled recovery has been the layoffs of public service employees by state and municipal governments because of reduced revenue. Economists believe this has a multiplier effect, with 2.4 jobs lost for each public sector layoff according to the Center for Public Policy Priorities. An average of 22,000 public sector workers lost their jobs every month through 2011, with a total of over 270,000 teachers and other workers being laid off. Even as private companies have ramped up employment, the shedding of jobs by state and local governments has kept unemployment levels high and made recovery more difficult. While the stimulus package from the federal government in 2009 did help preserve some of these jobs for a period of time, a considerable number of layoffs of teachers, policemen, firemen, sanitation workers, administrative personnel
Aside from the immediate effect, the loss of teaching positions will be particularly injurious to the nation’s economy in the future, since an educated citizenry is necessary to compete in today’s global world. America’s students are currently behind other nations in terms of educational proficiency and this will only worsen over time if class size increases and there are not enough teachers. And preserving and expanding the nation’s infrastructure falls mainly on the shoulders of state and local governments, with funds coming from Washington. Sadly, this is another area that has been neglected and will impact the nation in the future.
While this recession has been deeper than past downturns, the lag in recovery has been partially due to a focus on austerity by politicians at all levels combined with uncertainty over rising gas prices. Increased spending on education and infrastructure should be a priority for the nation to maintain and enhance its competitive position.
Resurrecting Democracy
www.robertlevinebooks.com3-16-12
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