With the end of WWII looming, Congress was concerned that 12 million returning service men would suddenly enter the labor market bringing back the Great Depression. Republicans argued that free enterprise market forces were both natural and compensatory enough to be self-correcting. Democrats, following theories of John Maynard Keynes, believed the Great Depression had disproven this thesis and vast government, deficit spending to conduct WWII had been a natural experiment proving the necessity of deficit spending to overcome insufficient aggregate demand. Democrats prevailed and passed the Employment Act of 1946. It specified that the federal government control inflation, production, and employment. It was mostly advisory and stripped of specific goals.

With the end of WWII looming, Congress was concerned that 12 million returning service men would suddenly enter the labor market bringing back the Great Depression. Republicans argued that free enterprise market forces were both natural and compensatory enough to be self-correcting. Democrats, following theories of John Maynard Keynes, believed the Great Depression had disproven this thesis and vast government, deficit spending to conduct WWII had been a natural experiment proving the necessity of deficit spending to overcome insufficient aggregate demand. Democrats prevailed and passed the Employment Act of 1946. It specified that the federal government control inflation, production, and employment. It was mostly advisory and stripped of specific goals.

These deficiencies were corrected under President Carter with passage of the Full Employment and Comprehensive Employment and Training Acts of 1978. It authorized the president to form “reservoirs of public employment” It guaranteed full employment and control of inflation with specific though flexible goals of approximately 5.5% for the former and 2.5% for the latter. The Federal Reserve manages monetary policy [money supply and interest rates], and Congress controls fiscal policy [taxes, government spending].

Monetary policy is like a rope: if pulled it is powerful in restricting the economy, but if pushed by increasing the supply and lowering the cost of money, it only permits but can’t force expansion of the economy if business doesn’t want to use the money for investment or increased jobs and wages. That is why we have had such a weak recovery from the Great Recession of 2008 e.g., business has used this cheap money to buy other firms and their own stock. “The new Congress will most likely shift to more reliance on fiscal policy in the next several years. [1]

Recently, congress has chosen not to engage in deficit spending or tax reform leaving recovery to the Federal Reserve. Consequently we have experienced an anemic recovery leaving millions under and unemployed with many “discouraged workers” and “missing men” opting out of the labor force entirely. Even near-zero interest rates and generous money supply have been inadequate to bring about full employment. We have achieved the goal of 5.0% unemployment more from reducing the denominator [labor force] than the numerator [employed workers] as the growth of “discouraged” workers has reduced the labor force participation rate to 62.8%. [6]

Hence, as President Trump enters office, millions of the discouraged, unemployed work force are hopeful the new Congress will use fiscal measures to increase employment. Fortunately, both parties agree on one fiscal action to do just that e.g., infrastructure.

“Infrastructure”

Infrastructure remained an obscure word until even the late 1980’s yet now is included in every State of the Union message. Webster defines it as,“ The nation’s public facilities making life and commerce possible and includes roads, bridges, the electrical grid, solid waste, and drinking water among others.” These public facilities are also often funded by private funds. [2]

The American Society of Civil Engineers [ASCE] estimates that America’s infrastructure is $1.44 trillion short through 2025 because the U.S. has funded only about 56% of its needed infrastructure spending. In their most recent quadrennial report card we earned a D+, with waterways and levees receiving the lowest grades. [3] The average age of the electrical power grid is 40 years and much of its equipment is more than 70 years old. In some areas, 80% hasn’t been upgraded in half a century. [4]

“Approximately half of major roads in the OKC and Tulsa urban areas are in poor condition, costing drivers roughly $1,000 annually. The OKC urban area ranks eighth in the nation among large urban areas in the share of roads in poor condition [5]

The problem

“Over the last two generations, America has suffered a quiet catastrophe: the collapse of work—for men. The percentage of men between 25 and 54 working is slightly lower than in 1940 at the tail end of the Great Depression. Many of the “missing men” are less-educated; never-married; and, African Americans. It is due largely to the decline of manufacturing; the rise of outsourcing and automation; and slow growth. For every prime-age man who is unemployed today, another three are neither working nor looking for work. The male exodus from work also undermines the traditional family dynamic, casting men into the role of dependents and encouraging sloth, idleness and vices perhaps more insidious. The new “men without work” normal is inimical to the American tradition and the nation’s very ethos.” [6]

The fourth commandment states, “Thou shall work six days.” [Ex.20:8] and subsequent verses confirm the command. [2Thes.3:10; Titus 3:14] Numerous academic studies confirm the benefits of work and damage of unemployment. Those who experienced the Great Depression echo these sentiments.

Economic conditions today are similar to those of the Great Depression and recommend similar solutions such as the Civilian Conservation Corps [CCC] and the Works Progress Administration [ WPA]. [Elaine’s and my uncle were in the CCC—hers under the command of reserve naval officer Coleman Raley.] We’ll look at these two programs in the coming weeks.

[1] USA Today, ‘Wall Street wants more fiscal policy, less monetary policy,’ Oct. 25, 2016

[2] Petroski, Henry, ‘The Road not Taken,’ NY: Bloomsbury, 2016, p14.

[3] Business News, May 10, 2016.

[4] Warshay, Brian, ‘Upgrading the Grid,’ Foreign Affairs March/April 2015, 125.

[5] The Oklahoman, Nov.3, 2016.

[6] Time, Oct.3,2016, p28.