What an Economic Recovery Policy Without Congressional Action Could Look Like

photo: Chris Daniels (flickr)

In my post about the rumored tax-cut stimulus package being tossed around at the White House, I quoted Dean Baker, who had some ideas on what you could do to stimulate the economy in a fantasy scenario. Since Republicans aren’t likely to let much of anything pass, and a jobs package would be an argument for the elections, something to run on, I think it’s worth making it as robust and attention-grabbing, and as functional, as possible. For example, paying unemployed people to do stuff as a policy.

However, people are actually hurting and need relief. So is there a way to provide them some without falling into the tax-cut trap, with all its long-term consequences?

Robert Kuttner thinks there’s a way, in particular using existing laws to reverse the disturbing, decades-long trend of falling wages.

Several laws on the books already prohibit theft of wages and phony classification of permanent workers as temps or contract hires and guarantee the right to organize or join a union and to be paid a minimum wage. None of these statutes is adequate, but under George W. Bush, the executive branch did its best not to enforce them.

Under President Barack Obama, prodded by the Task Force on Middle Class Working Families chaired by Vice President Joe Biden, the government has made some tentative steps toward better enforcement of labor laws. The Labor Department received an additional $25 million in its 2011 appropriation for enforcement of wage and hour standards, and plans are moving forward to revive other areas of enforcement that were deliberately sabotaged for nearly a decade.

The other source of leverage, potentially much more effective, is government’s power as a contractor [...] The Change to Win Federation, the Center for American Progress, and the National Employment Law Project have all proposed variants on the idea that government should reward contractors with good labor practices and avoid doing business with corporations that are labor scofflaws. In March 2009, the Obama administration embraced this idea in principle. The president issued three executive orders making it a little more difficult for government contactors to mistreat their employees, but with no meaningful enforcement mechanisms.

A new proposed presidential order setting up an embryonic system for giving modest preference to “high road” companies, after more than a year of internal debate, is still working its way through the bureaucracy of the Office of Management and Budget. Reportedly, the president has signed off on the concept, but the practical details are being challenged at each stage of review.

Even so, this initiative represents progress in principle. The challenge is to get on with it — and make it more than a token gesture.

These changes to labor enforcement laws would boost wages across the economy, increase wage competition, and force some of that business money sitting on the sidelines into circulation.

Obviously, the best way to scoop up that shortfall in demand is through better fiscal policy, or if you like, a mix of better fiscal and monetary policy. But a concerted effort to find and punish wage thieves, would reverse some sector-wide abuses and get more money in people’s pockets as they would earn what they actually should given US law. And rising wages would significantly bolster the economy.