Friday, March 1, 2013

Jobs Legislation for Our Time

The 21st Century Full Employment and Training Act

Rep Keith Ellison, John Nichols and Rep. John Conyers

By Bill Barclay
Progressive America Rising via DSA's New Ground

In May 2010, Rep John Conyers introduced a bill entitled "The 21st Century Full Employment and Training Act." The bill was little noticed at the time but, today, after another 7 months of dismal jobs reports -- we have actually lost ground during 2010, creating fewer jobs than the growth of the labor force -- there is renewed interest in this legislation by a range of progressive groups.

The Democratic Socialists of America has made mobilization around the Act a national priority; Progressive Democrats of America is developing a similar effort, as are both the Committees of Correspondence for Democracy and Socialism and the National Jobs for All Coalition . What follows is a summary of the major elements of the Act and why it is one that anyone concerned about the economy should support.

The 21st Century Full Employment and Training Act includes (i) funding for jobs; (ii) allocation of monies raised by the funding mechanism; (iii) job creation targets (who and what types of jobs); (iv) mechanisms for implementing the Act; and (v) a definition of the economic situations under which the Act would come into effect. I will take these topics one at a time. I will also briefly suggest what a political mobilization effort around the Act could look like.

Funding the 21st Century Jobs Program

Unlike many job creation proposals, the act is deficit neutral: It raises the money to pay for the jobs to be created. Funding for the Act is provided by a tax on the trading of financial assets (FTT). This levy is on trading of stocks, bonds (debt) and currencies -- both the actual financial asset and any derivative product based on the asset, e.g., futures or options, which provides a claim to the returns to holding the actual stock, bond or currency.

The FTT is set at 0.25% in the draft legislation. However, in the summary sheet that Conyers staff provided, the rate varies between stocks and other financial assets. There are good reasons for this variation that cannot be discussed in this article.

(See for a full development of the rationale for different levels of an FTT.)

When an FTT is proposed, people often ask, would it apply to me? First, it should be clear that an FTT, such as that contained in the Act, does not apply to the decision to deposit or withdraw money from a checking or money market account. Nor would it apply to someone seeking to change a few hundred or even a few thousand dollars for Euros or yen because of a planned trip abroad. These are not trades or investments. However, it would likely apply to transactions in a 401(k) or similar account. This is not necessarily a bad thing. At 0.25% level, it represents $1 on every $400 of stock (or other financial asset traded). Index funds that trade infrequently (e.g., Vanguard's S&P 500 Index mutual fund) do as well or better than mutual funds that are "actively managed." You can choose the former if controlling your investment costs is important. If, on the other hand, you think a mutual fund manager can outperform the market by more than the 0.5% FTT round turn plus the fee paid to the manager, you can choose the latter and pay the FTT.

A more important question is how much money could an FTT raise? This is significant because, unlike various other jobs bills (e.g., the Local Jobs for America Act proposed in the 111th Congress by Rep. George Miller), the Conyers bill does not start from a number of jobs to be created but from a mechanism for funding new jobs. There are a variety of analyses that people (including myself -- see above references) have done. A ballpark estimate can be constructed as follows: the value of stocks traded in the US has been between $45 and 70 trillion per year over the past 5 years. If an FTT were levied on only one side (buyer or seller) it would generate $135 billion on $55 trillion in stock trading; of course, levying it on both buyer and seller doubles this number. The value of trading in debt and currencies is equal to or exceeds that of stock trading -- and we haven't even begun to talk about derivative trading, where there are similar values represented. Clearly the amount of money raised by an FTT, and thus the number of jobs that can be funded, is very large.

Allocation of Funds

Perhaps Republicans will support for the Conyers proposal -- after all it is deficit neutral. How does the Act allocate the funds to create jobs? The Act creates two pools of money.

The 2/3 of the funds raised goes into "Employment Opportunity Grants" (EOG). Metropolitan areas and urban counties will receive a minimum of 65% of the money going into EOGs. A maximum of 35% of the money going to the EOG program is distributed to Indian Tribes (capped at 5%) and to states (capped at 30%) for allocation to units of local government that don't qualify under the metropolitan area and urban county categories. The remaining 1/3 goes into the 1998 Investment Act program.

Job Creation Targets As drafted, the Act allocates funds on an annual basis. For the first 9 months when the Act is in effect (see below), the kinds of jobs to be created are similar to those created by Harry Hopkins' Civil Works Administration (CWA) and Works Progress Administration (WPA). Both of these programs had, as their primary goal, putting as many people to work as possible. This meant, at times, choosing labor intensive methods over perhaps more economically efficient methods that substituted capital for labor.

During the initial 9 months of an EOG, the priority is fast track job creation. This includes painting and refurbishing schools, community centers and libraries; restoration of abandoned and vacant properties in foreclosure-decimated neighborhoods; expansion of emergency food programs; and renovation and maintenance of parks, playgrounds "and other public spaces." After the first 9 month period, EOG monies can be used for construction / rehabilitation / improvements of residences or public facilities. These include energy efficiency improvements and programs targeted at disadvantaged youth.

There are two points to note here, both of which are important in understanding the politics of a campaign that must be developed around this Act. First, many of these jobs require very limited training. Workers with little or no previous employment would have opportunity. Second, since the Act also gives priority to those who have been unemployed for more than 26 weeks (the BLS definition of long term unemployed, currently over 44% of total official unemployment), it addresses one of the most devastating aspects of the Great Recession.

Implementation of the Act

Who are the decision-makers under the terms of the Act? Who decides what jobs and what projects qualify? It is sometimes forgotten that many of the 1930s programs deliberately placed significant decision making power in the hands of localities. The Conyers legislation follows a similar path.

The Secretary of Labor administers the fund created by FTT revenues (the "Full Employment National Trust Fund"). However, decisions as to what work is to be done are to be made in consultation between EOG recipients and community groups, non-profits, labor organizations, community residents and local government officials. Thus there is considerable local input into what projects should be undertaken. In addition, there are important protections built into the Act for existing employees. First, no person employed under the EOG program can be paid a lower wage than workers already doing the same job. Second, prevailing wage rules would apply for construction projects. Third, if the EOG program is undertaken by a business that has a collective bargaining agreement in effect, the union in question must agree to and negotiate with the employer regarding wages and other working conditions. Fourth, no worker may be hired via the EOG program to replace someone currently employed that position. And finally, EOG program employees must be guaranteed a minimum of 30 hours per week and 12 months of work.

The Economic Conditions Under Which the Act Would Be in Effect

The Act is focused on jobs; therefore the economic conditions for placing the Act in effect are in terms of unemployment. The first of these "trigger levels" is an unemployment rate of 9% or more 6 months after passage of the Act. The Act steps down from there, finally to a 4% unemployment rate, the implied full employment level.

This section of the Act is perhaps the least clear and has been the subject of debate among supporters of the Act and discussions with the Conyers staff. There are at least two issues that need to be clarified.

First, does the Act propose that at any time the unemployment rate is above the listed percentages, the FTT and associated jobs programs will be triggered and that there is no cessation of the program, even if the unemployment rate falls below the trigger lever but is above the next trigger level? This is particularly important because of the gaps between trigger levels. For example, if the job creation program is in operation in year 2 (trigger level of 8% unemployment) and in year 3 the unemployment level falls to 7%, does the program cease, not to be restarted unless unemployment is above the 6% trigger level in year 5? Second, is the FTT only implemented during the time the Act is in effect or would the FTT continue to operate until the official unemployment level was at or below 4%, even if the Act was not consistently in effect because of variations in unemployment levels?

Creating a Campaign Around the Act

The politics of the Act have obviously changed since May 2010 when Rep. Conyers introduced it. However, the need for the jobs program envisioned by the Act has only grown. Conyers' staff -- and Conyers himself -- has urged a campaign similar to that developed around the single payer heath care bill. This could include several components:

1) Town hall meetings where Conyers may be the drawing card but the local congressional representative is the target. If Conyers is willing to come and speak, will the local congressional representative appear and respond/endorse as a co-sponsor? The town hall meetings should include at least two components in addition to Conyers and the local congressional representative. Unemployed workers can describe their situation: what they did before becoming unemployed, their experience looking for work, etc. In addition, however, DSA chapters and their coalition allies should do a "needs assessment:" What are the socially useful tasks that need to be done but will not be undertaken by the private sector? If we had the funding, how could the skills of the unemployed workers in our community be utilized to carry out meet these needs?

2) Rallies focused on the first Friday of the month BLS jobs release. These are already occurring in more than a dozen large and medium sized cities in the Midwest and the East. We should make this a national event.

While there will certainly be defensive battles to fight over the coming months, we need to define where we want to go beyond defense of the gains that have been won in earlier struggles. The 21st Century Full Employment and Training Act should be a central element in this effort to re-define the universe of political discourse. Today, austerity is the enemy of human progress -- expansion of socially funded and democratically controlled programs is the only way to maintain and improve the quality of life for all of us.

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