When your neighbor loses their job, it’s a Recession. When you lose your job, it’s a Depression.       Harry Truman

We are now three years into the Great Recession and jobs in Washington State remain at 200,000 less than we had just three years ago. Current policies have failed to solve our economic crisis. For nearly 20 years, I taught courses in leadership and problem solving at Bellevue College. There are several key steps to effective problem solving which are briefly described below. These problem solving techniques can be used to develop solutions which are more likely to lead to real recovery than current ineffective policies.

 Applying Problem Solving Principles to our Economic Crisis

There are 8 important steps to problem solving each of which can assist us in solving our current economic problems. Below are the 8 steps with an explanation of how each step can be used to address our current economic problems.

These are the 8 Steps of Systematic Problem Solving

STEP 1 - RECOGNITION THAT A PROBLEM EXISTS

STEP 2 - CRISIS MANAGEMENT

STEP 3 - IDENTIFY THE UNDERLYING PROBLEMS

STEP 4 - DEVELOP SEVERAL OPTIONS

STEP 5 - ANALYZE ADVANTAGES AND DRAWBACKS OF EACH OPTION

STEP 6 - CHOOSE AN OPTION

STEP 7-  CARRY OUT THE OPTION

STEP 8 - EVALUATE THE ACTUAL OUTCOME

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One of the first steps in solving a problem is recognizing that the problem exists. The following graphs confirm that the current Great Recession is different from all past recessions. It will therefore take different solutions to solve this problem.

The above chart makes it clear that we are not experiencing a normal cyclical recession. According to the Bureau of Labor Statistics, since 1950, the average cyclical recession hit bottom at 12 months and only entailed a 2% drop in non-farm employment. However, the current Great Recession suffered a decline in employment in Washington State of 7% - over three times worse that the average recession. Most troubling is the fact that there is still not any sign of sustained growth in employment. Instead, employment has remained below 2.8 million in our State for more than 2 years – and counting.

While job growth in the US averaged over 20% for the past 60 years, in the past 10 years, there has actually been a decline in jobs. Nearly all recent foreclosures have resulted from unexpected job losses and an inability to find a replacement job. It will not be possible to solve the home foreclosure problem without also solving the unemployment problem. The only way many homeowners could make their mortgage payments during the past 10 years was by refinancing their homes and using the equity to make their payments. When the housing market collapsed and this option was no longer available, they lost their homes to the same predatory bankers whose reckless speculation caused the current financial crisis.

Report on the American Workforce Table 12 http://www.bls.gov/opub/rtaw/stattab2.htm

2009 update from National Employment Table 1 http://bls.gov/news.release/ocwage.t01.htm

BLS Table 3: Subtracting # of employed workers from the total workforce. Seasonally adjusted http://www.bls.gov/news.release/archives/laus_03112009.htm

Every year about 100,000 new workers enter the Labor Force in Washington State by graduating from high school or college. Yet the number of jobs has remained at under 2.8 million for more than two years. This is a record number of unemployed workers for a record period of time.

When the Great Recession started in Washington State we had nearly three million jobs for 3.44 million workers. Thus, in January 2008, the true number of unemployed workers was about 470,000.

However, today the number of employed workers has fallen by more than 200,000 to less than 2.8 million. Meanwhile the workforce has grown by more than 100,000 to 3.54 million. Thus, the true number of unemployed workers in our State is now over 700,000 and rising by about 100,000 per year.

BLS Table 3: Subtracting # of employed workers from the total workforce. Seasonally adjusted http://www.bls.gov/news.release/archives/laus_03112009.htm

The number of unemployed workers in our State has risen from 470,000 in January 2008 to 750,000 today. This is more than triple the official number of unemployed workers listed by the Washington State Department of Employment Security. However, as this data comes directly from surveys of the US Bureau of Labor Statistics, these are certainly real people – likely “couch surfing” at the homes of friends – much like young unemployed workers rode the rails in the last Great Depression.

The true unemployment rate, taken by dividing the number of unemployed workers in the work force by the total number of workers in the work force was 14% at the beginning of the Great Recession in January 2008 and has risen to more than 21% today.

Thus, more than one in five Washington workers is without a job and most have been without a job for more than a year.

BLS Table 3: Dividing # of unemployed workers from the total workforce. Seasonally adjusted http://www.bls.gov/news.release/archives/laus_03112009.htm

According to the Washington State Employment Security Department, the amount spent on unemployment benefits has rose to a record $4.7 billion in 2010 – paid out to more than 500,000 workers in our State last year. The average time for being unemployed was 41 weeks last year (versus only 28 weeks in 2009).

As of February, 2011, more than 40,000 people in Washington State have exhausted all of their unemployment claims. About 1,000 more workers are exhausting their state and federal unemployment benefits each week.  It would be more productive to pay workers to work than to pay workers to not work. Families need pay checks, not just unemployment checks.

Even the statistical rise in jobs in January was actually a decline in jobs

The so called rise of 10,600 jobs in January 2011 was only a statistical manipulation due to seasonal adjustment. There was actually a loss of 47,100 jobs after Christmas. But since they were expecting a loss of 57,700 jobs after Christmas,  the papers reported an increase of 10,600 jobs. 

"In a very real sense, we lost jobs. But we lost fewer jobs than we normally would at this time of year." – Dave Wallace, Chief Economist for Employment Security, February 2011

But the real reason only 40,000 lost their jobs after Christmas was because fewer people had jobs before Christmas. There were only 12,000 private sector created in Washington State in all of 2010. According to the Washington State Employment Security Department, since there are nearly 800,000 unemployed workers in Washington State, there were 66 unemployed workers for every new job created.

 http://www.seattlepi.com/local/432215_unemployment.html

Source: US Census Bureau, Public Education Finances, Annual Reports, Table 12 www2.census.gov/govs/school/08f33pub.pdf

Even before the current budget cuts, State funding for public schools had plunged to near the lowest in the nation. Since 2008, over one billion additional dollars has been cut from school funding – firing thousands of teachers. As a consequence of these billions in cuts, our State is now 47^th in the nation in school funding as a percent of income and our children are subjected to the highest class sizes of all 50 States! 

In the past 2 years, thousands of teachers, health care workers and other essential State employees have already lost their jobs due to the billions in State budget cuts which have already taken place. Thousands more would have been fired had it not been for billions of federal stimulus dollars – all of which are schedule to expire in the next 3 months. It will take $3 billion additional dollars per year to restore school funding in our State to the national average.

Problem #8: State Support for School Construction and Repair has been cut one billion dollars per year resulting in a school construction and repair backlog of over $20 billion.  

The history of school construction and repair funding in Washington State during the past 20 years mirrors the history of school operation funding in that there has been a steady decline in State funding for school construction. Whereas our State legislature has historically provided more than 60% of the actual construction costs of public schools in the 1980’s, State funding has fallen to as low as 10% of actual costs during the past 10 years.

This decline in State Matching funds has resulted in a transfer of this funding obligation from the State to local property owners via an increasing dependence on local school construction bonds.

Like with operating costs, the State’s failure to help fund school construction has led to a dramatic increase in local school bond and levy costs which in turn have led to a rapid rise in local property taxes. This increase has been particularly harmful to those who are retired and/or living in a fixed income. At the same time, during the past 12 years, the legislature has granted billions of dollars in tax breaks to millionaires and major corporations, essentially transferring the tax burden for school construction and repair away from the rich and onto the backs of middle class homeowners. This unfair tax burden increase on middle class homeowners is as high as $1,000 additional dollars per year on a $500,000 home in King County.

As a direct result of massive tax breaks for millionaires, and the resulting plunge in State revenue, State support for our Universities has also plunged dramatically. In 1975, Washington State supplied over 75% of annual tuition costs. For more than 30 years, Washington State supplied more than 67% of annual tuition costs. As recent as 1996, State support was 67% of total annual tuition costs. In 2004, for the first time in our history, State support for annual tuition costs fell to less than 50%.

The 2009 legislature reduced State support to less than 30% of the total cost by 2010. The 2011 legislature reduced State support to less than 20%.

Sources: Data for the original report was complied primarily from the annual legislative reports of Washington State University. (http://olympia.wsu.edu/News). I used WSU because their documentation was more complete than the UW. Additional information was from a May 9, 2009 article in the Seattle Times “WSU approves 30% increase in tuition over 2 years”, as well as supplemental data from the National Center for Education Statistics and annual reports from the Higher Education Finance Report (see higheredinfo.org). This updated report includes information from the 2011 House Budget proposal as well as information from a Seattle PI article: http://www.seattlepi.com/local/connelly/article/Connelly-Ed-cuts-sabotage-state-s-future-1332642.php#ixzz1JZiSryN and associated graphs: http://www.seattlepi.com/local/gallery/Education-graphics-14469/photo-938223.php.

Problem #10: Billions in Cuts to the State Budget and Firing Thousands of Public Sector Workers (Hoover Economics) will only make things worse

This situation is likely to get much worse in the coming months as federal stimulus funding ends and thousands of teachers and other public sector workers lose their jobs. About 50,000 public sector workers will lose their jobs this summer – which will lead to downstream private sector job loses of another 50,000 (see image below). This will bring total jobs down below 2.7 million just as the work force is rising up to nearly 3.6 million. Thus, within a few months, there may be as many as 900,000 unemployed workers in Washington State.

The economic meltdown coming this summer will not only greatly increase foreclosures, but unemployed workers cannot shop at stores and can not pay taxes.

Therefore State revenues will continue to decline setting off a downward economic spiral much like what happened in 1930 to 1932 under the Herbert Hoover “budget balancing” economics.

Washington State Employment Will Decline Even Further if All Cuts Budget passes this year

In November, 2009, employment was just above 2.8 million. The Washington State Revenue Forecast Council predicted employment would rise rapidly to 2.85 million by 2011. In response to the ERFC report, I issued a report predicting that employment would remain below 2.8 million through 2011. We currently have about 2.78 million jobs. Many State budget cuts and job losses will go into effect this summer as 10,000 teachers, 10,000 college instructors and 20,000 health care workers are fired. These mass firings will be followed in the Fall be tens of thousands of downstream private sector employees losing their jobs.

By the end of 2011, the number of employed workers will fall below 2.7 million. Total job losses since 2007 will exceed 300,000.

Each billion dollars cut ends the employment of over 10,000 public sector workers. So $6 billion in biennial cuts equates to $3 billion per year which equates to the loss of at least 30,000 public sector jobs. Thus, the unemployment problem is likely to get much worse in the next year as a direct result of billions of dollars in State and federal budget cuts.

The coming loss of jobs makes it even more important to draft a bill for creating at least 200,000 jobs – 100,000 in the public sector and another 100,000 in the private sector. Ideas for creating and funding these jobs are described in other sections of our website.

On June 3, 2011, the Bureau of Labor Statistics (BLS) reported that only 54,000 jobs had been created in May – far below the 200,000 needed just to keep up with population growth – and raising the prospect of a Double Dip Recession. The unemployment rate among those actively seeking work was 9.1%. Among total workers, including those who have given up looking for work, the unemployment rate was over 16%. The vast majority of these workers have been unemployed for more than 6 months. http://www.bls.gov/news.release/empsit.nr0.htm

But the BLS estimate is based on a household survey and surveys are known to be inaccurate due to “favorable response bias”. People do not want to admit that they are unemployed and unemployed are less likely than employed to even answer the phone and complete the survey in the first place. So if these numbers are known to be inaccurate, what other more objective measures can be used to determine the real unemployment rate?

In this report, we will show that the REAL unemployment rate is about 27% - three times the official reported rate of 9%. Even more ominously, we will show that the REAL unemployment rate for young adults is about 53% - more than TWICE the official unemployment rate for young adults of 24%. The reason the REAL unemployment rate is so much higher than the official unemployment rate is due to the BLS practice of not counting millions of “Invisible Unemployed” working age adults.

What is the US population age 16 and over and what is the monthly rate of growth?

Ideally, the real unemployment rate is the number of unemployed workers divided by the number of workers in the workforce. The number of workers in the workforce in turn is related to the growth in the total US population which is age 16 and over. So this is where we will begin.

BLS Table A1 for the past 10 years notes that the total population age 16 and over is currently 239 million and has grown from 214 million 10 years ago. This is 25 million over 10 years, 2.5 million per year or 210,000 per month. In the past 3 months, this rate of growth has slowed to about 160,000 per month. But not all of these 160,000 adults actually enter the paid workforce at age 16. Some continue in school (although the number entering and leaving high school and college each year should balance out). Some become full time caregivers for their children. So the next question is what percent of the population actually enters the workforce – by needing and looking for a job?

What current US workforce population and what is its monthly rate of growth?

This question is troublesome because its answer typically relies on BLS survey data which is known to be inaccurate. Here is the official answer from the BLS: The Labor Force today is estimated to be 153 million and 10 years ago, it was 143 million. So it has officially grown by 10 million in 10 years or 1 million per year or about 83,000 per month. Recently, the Labor Force growth rate, according to the BLS monthly survey, has slowed to 70,000 per month.

This would mean that 90,000 adults out of 160,000 adults per month – over half of all adults - are NOT entering the Labor Force! This is clearly not accurate as only 80,000 of the 160,000 are women and fewer than half of all women have children and over half of these are in households where both parents are working. So it is far more likely, that growth of the Labor Force is 140,000 adults per month – or DOUBLE the BLS estimate of 70,000 per month.

The BLS claims that the percent of adults in the work force has declined from 64% to 58% in the past 10 years. However, there are many fewer women today having children than 10 years ago. Also, there is a much higher percent of women with children who are working today than were working in the past. So the percent of adults in the work force should be going up, not down.

One percent of the population is 2.4 million. So a 6% error is 14.4 million adults who should be or would want to be in the work force but not counted by BLS – just since 2001.

It is therefore likely that the actual Work Force, including all two – wage earner families - is much higher that 153 million. Given that the BLS method under-estimates the work force by 70,000 per month or 840,000 per year, over the 50 year lifetime of the workforce, the actual workforce is likely to be 153 million plus 40 million or about 193 million adults – leaving only 46 million adults who are not in the work force. Put another way, the BLS claims that only 60% of all adults are in the work force, when the actual number is closer to 193 million divided by 239 million = 80% of all adults. The BLS is simply not counting 40 million adults and its estimate is becoming increasingly inaccurate every month. This is why we must seek out more accurate assessment measures than merely calling folks on the phone, hoping someone answers and then hoping they will tell us the truth.

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 Republicans are hailing their special election victory in the heavily Democratic 9^th Congressional District in New York as a sign that the voters have rejected the policies of Barack Obama. But the actual vote totals tell a much different story:

As of 11 a.m. today, with 459 of 512 precincts counted, The Associated Press reported that Turner had 32,446 votes to Weprin's 27,699, for a 54-46 percent winning advantage.

Keep in mind that the average Congressional District in the US has over 600,000 residents. Typically about half or 300,000 vote in competitive Congressional races. Even in 2010, which was a very low turn out year for Democrats, 67,000 turned out to vote for Anthony Wiener in the 9^th CD with 43,000 voting for Republican Bob Turner for a total of 110,000 voters.

The 2004 election was a truer measure of the actual number of Democratic voters in the 9^th Congressional District being more than 110,000:

In 2004, the total vote was nearly 160,000. So a total of only 60,000 votes in the 2011 Special Election means that as many as 100,000 voters simply did not vote in the 2011 Special Election. Even more important, this 100,000 included 90,000 Democrats and independents, and even 10,000 Republicans who failed to vote! The real message here is that the majority of voters are so disgusted with BOTH political parties, that they are expressing their disgust by not voting at all.

This is also what caused the landslide defeat of Democrats in the 2010 election. In nearly every case, Republicans did NOT get more votes than they got in 2008. Rather Democrats got far fewer votes in 2010 than in 2008 – as Democratic voters were so disgusted that they simply stayed home.

The cause of this disgust, or disillusionment with the leaders of the Democratic Party, was that Barack Obama ran as a Progressive FDR Democrat in 2008, but has served as a pro-corporate Hoover Republican ever since. So the real message is that if Democrats want to win future elections they must honor the promises Obama made in 2008 and stop caving to the demands of Wall Street Bankers and Corporate Lobbyists. The public has rejected the policies of Barack Obama – but the policies they rejected are his claims to be a populist in his speeches, while turning our country over to the very Wall Street crooks who destroyed our economy in the first place.

The public wants jobs, not budget cuts. The public wants accountability and an end to political corruption, not more loopholes and corporate welfare for the super rich. The way to win elections is to change the direction of the Democratic Party – not by turning it into another version of the Republican Party – but by returning to Progressive Democratic Party values which will create jobs and restore our economy. The way to get Democratic voters to vote again is for the leaders of the Democratic Party to start acting like Democrats again – and give Democratic voters something worth voting for - not by repeating the failed trickle down economic policies of the Republican Party. For more information on ways Democrats can create jobs and rebuild our economy from the bottom up, visit our website: coalitiontocreatejobsnow.org