Originally posted on the Huffington Post
I am reading "Daniel Patrick Moynihan, A Portrait in Letters of an American Visionary" edited by Steven Weisman. It is a good title because Moynihan was indeed a visionary. His memorandum to President Johnson on the black family in 1965 said that the disappearance of jobs for blue collar black men was destroying once-stable families. "Men must have jobs," Moynihan said. "We must not rest until every able-bodied Negro male is working." The memo was attacked as racist, but Moynihan was right. Fifty years later, white working class families are breaking down because the kinds of jobs that blue collar white men used to do are scarce as technology replaces people in myriad occupations.
The best if still imperfect solution to this festering economic and social problem is the one Moynihan called for in 1965. "We must not rest until every able-bodied male (of any hue) is working." Self-respect, responsibility for children and partners, confidence in the strengths of American culture and values and in the ability of our political system to solve problems requires this.
The election of 2016 will be another chance to select leaders who understand that for millions of blue collar men the ability to earn is central to their sense of self-worth. Full employment is the key to earning. To achieve it, the economy will have to run much hotter than it has recently, drawing in not only more of the unemployed, but those who have dropped out of the workforce or are only partially employed. These jobs should be overwhelmingly in the private sector, but governments at every level will have to find ways to encourage and in many cases finance their creation.
What worries me is the attitude reflected in a Wall Street Journal article of May 8. (Derby, Michael S. WSJ, May 6, 2015, "U.S. Economy May Reach Job Market Nirvana in Next Six Months.") The article says that economists at the Atlanta Federal Reserve and elsewhere believe the U.S. is approaching "full employment," which they define as 5 percent. Lower than 5 percent, they warn, risks inflation. The unemployment rate is now 5.4 percent which makes 5 percent very close, but it is obviously too high to pull in all the working class people, black and white, that must be drawn into the workforce.
These concerns about inflation remind me of a Christmas party in 1994, when I was the Deputy Undersecretary of Commerce for Economics and Statistics in the Clinton Administration. Unemployment had just dropped below 6 percent and economists, including liberal ones, were warning that inflation was just around the corner if the Fed did not raise interest rates to cool the expansion.
Soon to be Secretary of the Treasury Larry Summers was at the party. I told him that I had a Working Group on the Pricing Outlook at the Commerce Department. It was made up of industry experts that Commerce Secretary, Ron Brown had let me convene. These experts knew over 150 industries from textiles to computers. They told me that companies wanted to raise prices but competition had become so stiff since the 1980s that they could not do so. Based on this, I said to Summers that I thought unemployment could go below 5 percent and there would be no inflation. His response was a succinct "b--- s---."
Many and probably most economists then and now would have agreed with Summers. In 2000, however, 6 years later, unemployment had fallen to 3.8 percent and there was no inflation. There won't be any now if domestic and international competition remains robust. When nothing is scarce, as is the case now, competition drives prices down.
What President Obama and the next president ought to do is ignore the inflation hawks and set 0, 1, or 2 percent unemployment as a goal. Inflation measured by the Consumer Price Index was only 1.3 percent higher this week than 2 years ago, and as Pat Moynihan said 50 years ago, "men must have jobs."