Suggestions on How to Give

“It’s the economy, stupid.”

– James Carville, lead strategist

for Bill Clinton’s 1992 campaign

This phrase was used effectively during Bill Clinton’s successful campaign against George H.W. Bush. It helped convince the American electorate Clinton was better suited to cure our economic ills.

It is payback time.

The Democratic Party could lose control of Congress in November’s midterm elections primarily because of the single issue of our high unemployment rate. Jobless claims rose to 500,000, a nine-month high, in the week ended Aug. 14. One in six Americans is either unemployed or underemployed.

The public primarily blames the president and Congress for the unemployment rate being 9.5 percent, compared with the country’s historical norm of about 5 percent. The country is enduring a jobless recovery and anemic real growth. Some analysts now expect second-quarter economic growth to be revised downward to 1 to 1.5 percent from an initial estimate of 2.4 percent.

Since 2008, under the George W. Bush and Obama administrations, the government has enacted unprecedented fiscal and monetary policies to increase the aggregate level of demand and revitalize our economy. But the budget deficit, which in 2009 was about $1.84 trillion, has become counterproductive. It undermined confidence, which in turn reduced consumption and business-investment spending. Simply said, the government is almost out of ammunition.

President Obama’s $787 billion stimulus project subsidized some jobs, mainly in road work and construction, but failed to achieve its goal of preventing unemployment from rising above 8 percent and to “save or to create” 3.5 million jobs.

The government has thrown trillions of dollars in liquidity lifelines to many types of financial institutions — commercial banks, money-market funds and financial subsidiaries of manufacturers. Interest rates hover near record lows.

The U.S. government became a shareholder in a host of businesses, such as Fannie Mae and General Motors.

On Aug. 19, Doug Elmendorf, the head of the Congressional Budget Office, predicted that the U.S. unemployment rate will not be below 5 percent until 2014. His reasoning: “The considerable number of vacant houses and underused factories and offices will be a continuing drag on residential construction and business investment, and slow income growth as well as lost wealth will restrain consumer spending.”

Economists have noted that structural changes — such as technology and economic globalization — have contributed to higher American unemployment. Technology did away with many low-skill manufacturing and middle-level service jobs. And global competition from developing countries such as China and India has reduced domestic manufacturing and service jobs.

What are some possible government solutions to fix our economy?

Offer tax incentives to companies to hire and train new employees.

Provide scholarships and loans to individuals to take courses that upgrade their job skills. American workers who have the technical skills to perform complex tasks enjoy enviable job prospects.

Increase incentives to long-time unemployed to take jobs.

Provide cheaper financing costs for small businesses.

In a June 6 article in The Financial Times titled “America’s jobless picture is alarmingly bleak,” Mort Zuckerman, publisher of U.S. News and World Report, wrote, “We are going to have to develop policies and government support to deal with the long-term jobless who become less employable the longer they lack a regular job. And long-term unemployment has gone from 2 million in June 2004 to 6.7 million in April 2010.”

James Carville’s Democracy Corps commissioned a poll at the end of July 2010 to test the mood of the electorate. He discovered that voters are growing increasingly pessimistic about the economy, and increasingly inclined to deliver a protest vote in November.

Yes, Carville’s words from the 1992 campaign are coming back to haunt the Democrats.