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The economy: Smart initiatives by our federal government can put economy on a fast track

WASHINGTON — EDITOR’S NOTE: The writer is addressing the question, “What are the five best steps Washington can take to boost the economy?”

For much of America, it still feels like we are in a recession.

We have recession levels of unemployment, with the headline rate at 7.7 percent. And that jumps to 14.4 percent if we count the underemployed and those who have given up hope.

Here are five things we can do to get the economy back on track in 2013:

--Provide more federal revenue to the states: State governments need money so they can increase employment, which has been hit very hard since the beginning of the Great Recession. We have lost teachers, firefighters, and many other workers whose absence compromises or endangers our future. Since February of 2009 the number of state and local government employees has shrunk by more than 600,000, plus an equal or greater number that would normally have been added.

For those who worry that the federal government is too indebted, don’t believe the hype. The most important measure of our public debt burden is the net interest paid by the government on the debt. That is less than 1 percent of our national income, lower than it has been in the post-World-War II era.

--Increase employment through work-sharing: The legislation for this one has already been passed. States are now entitled to federal money to help employers keep workers on the job, those who would otherwise be laid off due to weak demand. State unemployment insurance funds are used with reimbursement from the federal government; pay is reduced but not as much as hours. This is a better deal all around that can save millions of jobs.

--Public investment in energy savings: Why do so many people fly from New York City to Washington, D.C., when other countries—some much poorer than us—have trains that can make such a trip in about the same time and with much less energy consumption?

Why can’t we invest in mass transit, in increasing the energy efficiency of buildings and in renewable energy sources such as solar and wind energy? Or in modernizing our electrical grid? The high-income countries of Europe use about half as much energy per person as we do. This is where public investment can create jobs and stimulate the economy while slowing the climate change that threatens the entire planet.

--A financial speculation tax: Need some revenue to finance any of the above? How about taxing something that is bad for our economic health, the way we tax cigarettes to raise revenue and reduce lung cancer at the same time. A very small tax on financial transactions—just 0.03 percent as called for by the Harkin-Defazio bill—would raise about $40 billion a year while reducing some of the casino trading that helped crash our economy and still left us with a morbidly obese financial sector.

--A more competitive dollar: Some people think it’s a great thing to have a “strong dollar,” and it’s fine if all you care about is your vacations in other countries, or if you are Wall Street and want cheaper assets and labor overseas. But most of the 5 million manufacturing jobs that we have lost in the past 20 years are a result of an overvalued dollar, which makes our imports artificially cheap and prices our exports out of foreign markets. Bringing the dollar down, which our government could easily do, could also add millions of jobs to our economy.

Of course there is one place where government spending needs to be slashed: our bloated military, with its hundreds of unnecessary bases around the world, and the pointless, never-ending war in Afghanistan. But we can make sure that these cuts won’t hurt the economy by re-routing this currently wasted money to our pressing needs at home.

Mark Weisbrot is the co-director of the Center for Economic and Policy Research. Readers may write to him at CEPR, 1611 Connecticut Ave NW, Suite 400, Washington, D.C., 20009.