Let's Go Back to Hooverville!

Unemployment and poverty in the United States is setting the stage for riots, New York Mayor Michael Bloomberg warned on a weekly radio show.

Speaking on WOR [yesterday], the Independent mayor made the unusually negative warning, but avoided direct criticism of Democratic President Barack Obama for a 9.1 percent national unemployment rate, saying Obama had inherited it “over long periods of time,” the New York Daily News reported.

Referring to riots earlier this year in Cairo and Madrid by tens of thousands of people unable to find jobs, Bloomberg said "You don't want those kinds of riots here."

                                                    --UPI (emphasis added)

Oh, I beg to differ . . . .

Well, okay – maybe not riots.  But some damned serious civil disobedience seems to be in order.  Does anybody who has been paying attention to what is happening on Capitol Hill have any faith whatsoever that our government will do anything about the country’s seemingly chronic unemployment rate, or that the employment situation might suddenly correct without government intervention?

To the contrary, many people – mostly on the Right -- are arguing that what we are seeing in the United States is a significant rise in “structural unemployment.”  That is, there is employment to be had but structural problems -- government over-regulation, corporate uncertainty about potential tax hikes, a shortage of workers who don't need to be retrained or relocated – prevent the economy from growing.  But as Paul Krugman argued persuasively just a year ago, there is very little evidence to support such a conclusion.  For example, if the nation were struggling with structural unemployment

there should be significant labor shortages somewhere in America – major industries that are trying to expand but are having trouble hiring, major classes of workers who find their skills in great demand, major parts of the country with low unemployment even as the rest of the nation suffers.

None of these things exist.  Job openings have plunged in every major sector . . . .  Unemployment has surged in every major occupational category.  Only three states, with a combined population not much larger than that of Brooklyn, have unemployment rates below 5 percent.

. . . .  The National Federation of Independent Businesses has been surveying small businesses for many years, asking them to name their most important problem; the percentage citing problems with labor quality is now at an all-time low, reflecting the reality that these days even highly skilled workers are desperate for employment.

So all the evidence contradicts the claim that we’re mainly suffering from structural unemployment.  Why, then, has this claim become so popular?

In fact, Krugman answered that question earlier in his column:  because it “serves as an excuse for not pursuing real solutions.”  And that sounds about right to me.  We know how to get the economy moving again, because we did it once before when we lifted ourselves out of the Great Depression.  What we have to do is bite the bullet, raise the top marginal tax rates, and engage in an absolute ton of deficit spending:

 [B]eginning in 1933, when he finally took office, [Roosevelt] did just that.  Vast public projects and public workforces were put together, huge investments were made not only in practical infrastructure (roads, dams, bridges, etc.) but also in things like artwork, murals, national parks, anything and everything that would put people back to work, jump start the economy and get the country moving again.

[snip]

[But i]t would take the largest federal spending program the country had ever seen to finally pull us out of our economic malaise:  World War II.

World War II jumpstarted the economy not because it was a war but because it forced the government to spend the vast amounts of money necessary to get the country moving again.  The political problem with Keynesian fiscal policy is that it always looks like “out of control” spending.  People tend to worry when it looks like the government is taking on too much debt; there is even a whiff of immorality about it.

But people don’t bother too much about that stuff when it looks like the alternative is utter destruction by evil forces.  All in all, people understood why we were fighting World War II, they understood the necessity for it, and they were willing to go all in to win the fight.  That meant racking up enormous government debt to pay for the new military. . . .  And to support this spending it meant paying new taxes, too.

Perhaps a war of this type, of this moral certitude, is the only thing that can convince enough Americans to pay the taxes and rack up the debt necessary to climb out of an economic hole as vast as the Great Depression was, but that doesn’t mean that “war spending” is somehow magical.  If World War II hadn’t presented itself, the same effect could have been achieved by having the government invest the same resources to totally overhaul our infrastructure.  The only problem is that overhauling infrastructure isn’t nearly as sexy as going to war, and it almost certainly does not command the kind of passion that makes most of us disregard tax increases and massive government deficit spending.

(H/t to Kevin Drum for the graph).

The good news is that interest rates on U.S. debt are so low now that massive deficit spending is amazingly cheap.  Indeed, as of yesterday the real interest rates on 5- and 7-year U.S. bonds are negative, which means it is actually cheaper to borrow money than it would be not to go into debt.

The bad news is that there is very little political will to either (i) raise top marginal tax rates, or (ii) engage in massive deficit spending.  And even if all the congressional Democratic lawmakers and President Obama wanted to do so, the GOP controls the House and a large enough minority in the Senate to prevent any such action from taking place.

So although we know what needs to be done to jumpstart the economy and put people back to work, there isn’t a chance in hell that Washington will actually do it.  Hence our political leaders’ enthusiasm for blaming the nation’s high unemployment rate on ‘structural factors’ – it allows them to avoid responsibility for their utter refusal to acknowledge what needs to be done.

So I think it's time we went back to Hooverville.

* * *

For those unfamiliar with the term, “Hooverville” was the name given to a large encampment of WWI veterans who marched on Washington in 1932 – three years into the Great Depression – demanding the immediate redemption of the bonuses they had been promised for their service in “the war to end all wars.”

[A]n assemblage of nearly 43,000 people gathered to march on the capital and demand the payment of their WWI bonuses (the marchers included not only the WWI veterans themselves, but also their families and other sympathizers).  But it wasn’t simply a march; in an attempt to embarrass the government into paying their bonuses, the marchers created a shanty town named “Hooverville” across the Anacostia River from Washington.  Although a shantytown, Hooverville had streets, sanitation facilities, and was tightly controlled by the veterans.

Although they had taken no violent action, and in fact their protest consisted of nothing more than existing and holding daily parades, on July 28^th the U.S. Attorney General ordered the police to remove the Bonus Army (as it was called) from Hooverville.  The veterans did leave, but then immediately returned.  When they did they found two policemen cornered on the second floor of a building.  The policemen opened fire on the returning veterans, killing two of them.

President Hoover then decided to order the United States Army to remove the veterans from Hooverville by force.  Accordingly, General Douglas MacArthur (yes, that MacArthur) brought out an infantry regiment, a calvary regiment, and six battle tanks (commanded by George S. Patton; yes, that Patton) to take out the protesting WWI veterans.

The calvary charged the veterans, and then the infantry forces marched on them with fixed bayonets and tear gas, gassing their fellow citizens.  They evicted the veterans and their families, who fled, and President Hoover called off the assault.  However, MacArthur was sure that the Bonus Army was really a Communist attempt to overthrow the government – despite the lack of any evidence to support this theory – and ordered a new attack anyway.  In all, 55 veterans were wounded, a veteran’s wife miscarried, and a 12 week old baby died in the hospital after being caught in the tear gas attack.

Once again, an example of the United States military taking up arms against its own citizens, gassing its own citizens, who were only exercising their right to peaceably assemble and protest.  The military did so on the orders of the United States President just to save him from embarrassment . . . .

* * *

I’ve been paying fairly close attention to the political wrangling in Washington since Wall Street flushed the economy down the crapper, and I’ve come to believe that the only thing that might possibly shift Congress to do something, anything, to help the American people is a protest as massive, as sustained, and as embarrassing as that staged by the Bonus Army eighty years ago.

What else could possibly shift them?  The run-up to the Iraq War made it clear that protests, marches or demonstrations are easily disregarded these days. In terms of sheer numbers, those were the largest demonstrations ever staged in the history of the human species.  But George Bush the Lesser and his congressional cheerleaders could easily dismiss them because, as Paul Krugman pointed out, our national media found them easy to ignore:

[In] January-February 2003, [] anyone watching cable news would have believed that only a few kooks were opposed to the imminent invasion of Iraq.  It was quite spooky, realizing that hundreds of thousands of people could march through New York, and by tacit agreement be ignored by news networks whose headquarters were just a few blocks away.

Moreover, if the research presented in Larry Bartels’s Unequal Democracy:  The Political Economy of the New Gilded Age is correct, “elected officials respond to the views of affluent constituents but ignore the views of poor people” – and as we all know, the affluent are doing quite well in the midst of this Great Recession.  So it seems unlikely that a letter writing or office calling campaign by the unemployed is likely to carry much clout on  Capitol Hill.

No, what is needed is an enormous protest that can be sustained for weeks, even months, a protest that will cause greater and greater embarrassment the longer it goes on, and a protest that – and this is the really important part – will force a conflict between the protesters and the government.  Only in this way can we insure that the demonstration cannot be ignored.

Ideally, I’d like to see an army of unemployed workers, tens of thousands strong, descend on the National Mall and Lafayette Park.  I’d love to see that army set up a shantytown just like Hooverville, complete with streets, sanitation services, and peacekeeping volunteers.  Above all it would be orderly, clean and patriotic – as with the Bonus Army, daily parades and a ceremonious raising of the flag could be held.

The entire demonstration could be set in place, mostly funded, and structured by organized labor.  That would give Labor the opportunity to remind the American public that the Labor Movement is not only about securing union workers' rights, but is much more broadly concerned with securing full employment, fair wages and humane working conditions for all workers.

And in my vision the entire thing would be done illegally.  No permit would be requested for this peaceable assembly, no deadline would be fixed for its end.  Park security and law enforcement would be forced to conduct mass arrests, every single day, because for each person arrested another would be found to take their place.  You get a large enough assembly, and eventually the Powers That Be would have no choice but to allow the Labor Army (or whatever you want to call it) to remain. . . or else call out the national guard, and the tanks, and the calvary (or, these days, maybe just the Predator drones) and take up arms against American citizens.  But in full view, this time, of the 24-hour cable news cameras.

And like I said, it would last for weeks, months, embarrassing our government before the world, until Congress and the President agreed to the spending hikes necessary to get the country moving again, get people working again, and making this country once again a place in which everyone can be heard.

. . . .  Well, I can dream, can’t I?