By Fareed Zakaria
Democrats are finally up for a fight — with President Obama. Having despaired that Obama gave in to the Tea Party on the debt deal, they now criticize him as too cautious in his proposals to boost American jobs. They’re right that Obama should present a sharp distinction to the public between his efforts and the Republican Party’s utter passivity in the face of a national employment crisis.
But perhaps Obama realizes that the most important factor that will help his reelection — and Democratic prospects more generally — is a rise in employment. And to have any impact on the actual economy, Obama needs proposals that can get through Congress, not ones that sound good on TV.
The problem before the country is more acute than people realize. It goes beyond the indebtedness issues that are surely depressing the recovery. In June, the McKinsey Global Institute published an eye-opening report called “An economy that works: Job creation and America’s future.” It points out that for 20 years, America has had huge difficulties creating jobs. After every recession since the Second World War, once gross domestic product recovered to pre-recession levels, employment also returned to pre-recession levels within about six months.
Until 1990. In the recession that began in 1990, it took 15 months for jobs to come back after GDP had recovered. In the recession of 2001, it took 39 months for jobs to come back.
And now? Since the start of this year, American GDP has returned to its pre-crisis levels — but with 6.8 million fewer workers. At the current rate of job creation, it will take 60 months — five years! — before employment returns to pre-recession levels.
Even these numbers mask the problem. The Nobel Prize-winning economist Michael Spence has found that of the 27 million jobs created between 1990 and 2008, 40 percent were in government and health care — sectors that can’t keep growing at their previous pace. Meanwhile, employment in the tradable sector of the U.S. economy, the sector that produces goods and services that can be consumed anywhere, such as manufactured products, engineering and consulting services — which accounted for more than 34 million jobs in 1990 — grew by just 600,000 jobs over the same 18-year period.