Business Update with Mark Lacter for February 9, 2010
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KPCC business analyst Mark Lacter talks about the problem with job loss.
Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, when you look at the problems caused by a loss of jobs, you say it’s the long-term unemployed. Why’s that?
Mark Lacter: Here’s an amazing number, Steve: As of December, there were 726,000 people in California who have been out of work more than six months. That’s one out of three unemployed Californians – way higher than the figure from a year ago. Normally it doesn’t work this way. Normally, people are out of a job for a few weeks, maybe a couple of months, and then they find work. But as we know by now, business owners are very reluctant to hire – it could be because of tight credit or concerns about the economy or their own financial situation. So the system gets clogged up.
Julian: And being out of work more than six months is a big deal because after that, you run out of unemployment benefits.
Lacter: That’s right. Congress has already extended some of those benefits and there's talk about another short-term extension, but this is obviously not a short-term problem – and we’re seeing the effects in all kinds of ways. The Los Angeles Regional Foodbank says that almost a million L.A. County residents (that’s one in 10) received some sort of assistance last year from food pantries or soup kitchens. That’s an extraordinary number. Also, huge increases in the number of Californians enrolled in the food stamp program, in Medi-Cal, in the Healthy Families program – many of the same government-funded programs on the chopping block themselves.
Julian: So where these folks are supposed to get help?
Lacter: Good question, especially if we have double-digit unemployment for another year or two (what many economists are forecasting). If these folks don’t find work, they will keep needing social services – and they also they won’t be spending money or paying taxes, which in terms of our deficit problems is terrible.
Julian: It’s pretty clear, Mark, that the C-17 program shows why the government has so much trouble with jobs.
Lacter: That’s right – this is the big military cargo plane that’s made at Boeing’s Long Beach plant. It employs 5,000 people directly and thousands more through suppliers. This year, the C-17 wasn’t even in the Pentagon budget request, which means a savings of $2.5 billion (significant dollars in a year when there’s been such a push to keep costs under control).
Julian: And yet, you have local lawmakers on both sides of the aisle already pushing for more production –
Lacter: Yes, just as they did last year when funding was approved for the construction of 10 more planes. It all has to do with those 5,000 local jobs. If the C-17 were to be phased out, those jobs would disappear another year or two. Now, this gets tricky because there are so many conflicting agendas. Killing the program might be good for deficit hawks but not necessarily military hawks, who don’t want military spending to be slashed. Then there are the political considerations: Barbara Boxer, the California Democratic senator, is running for reelection this fall and there’s no way she’s going to support phasing out the C-17. Already, she’s announced her opposition, along with several House members from California. Why run the risk of losing those votes?
Julian: So, if the jobs had been in, say, Arizona or Nebraska, different story.
Lacter: Right. Now, take this situation and imagine all the other hundreds of government-funded programs that would create or hold onto jobs, but aren’t necessarily in the nation’s economic interest. This is why lawmakers seem to talk with both sides of their mouth, and it’s also why government spending can never be contained very easily. Just too many agendas.
Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes a business blog at LA Observed.com.
