House of Cards and Direct Job Creation Policy

It’s pretty rare that pop culture and my dissertation intersect, so when President Frank Underwood announced his “America Works” proposal in the first episode of the third season of Netflix’s House of Cards, my ears definitely pricked up. In the show, President Underwood proposes (on the Colbert Report!):

“a new jobs program we’re calling America Works…this is a fundamentally different look at how to solve the problem of unemployment. It has the size and scope of the New Deal…This is about putting people to work and avoiding the entitlements entirely…”

This program, aimed at creating “full employment within two years” through investing in Federal “infrastructure…expanding the military, and partnerships with our friends in the private sector,” comes with a price tag: “500 billion dollars to put [10 million] people to work” coming out of “Social Security, Medicare, Medicaid, every entitlement program that’s sucking us dry.”

So let’s examine President Underwood’s new initiative, shall we?

Now, like many aspects of House of Cards, this is a plotline borrowed from the original UK show. In “House of Cards: To Play the King,” (the second series of the original) Prime Minister Francis Urquehart engages in a protracted struggle with the King over the Tory Party’s neglect of the poor and the declining inner cities – paralleling critiques made of Margaret Thatcher’s tenure as PM in the 1980s, when unemployment rose to 12% in 1984, even as North Sea oil surpluses were given away as tax cuts for the affluent. Rather than give in to the “softs” on welfare spending, Urquhart announces that he will have unemployed youth in public housing conscripted into the military to solve the unemployment crisis and rising crime in a way that emphasis conservative values rather than the welfare state.

Longtime fans of British political television might remember this same plotline from Yes, Prime Minister, where Prime Minister Jim Hacker attempts the same reform as his solution to youth unemployment and poverty in a decidedly less violent and more comedic fashion. There’s a reason for these parallels: using National Service as a right-wing solution to poverty has been proposed by the right of the Tory Party since the Thatcher years and up to the present day.

As a borrowed policy – this time, using entitlement spending as the right-wing balance to the mass provision of work to the unemployed – this works a lot better than Season 1’s education reform plotline, which imagined a national teacher’s strike brought about by a Federal education reform bill. This made sense in the U.K version, as British teachers are employees of the national government, but not in the U.S, where teachers work for thousands of local school districts and where the Federal government makes up a decided minority of education funding. By contrast, the Federal government is generally expected to deal with national economic policy.

And the Federal government has engaged in direct job creation before: in 1934, the Civil Works Administration put 4.26 million people to work in three months; more than eight million Americans were employed by the Works Progress Administration (WPA) from 1935 through 1943. And after the 1973-1975 recession, the Comprehensive Training and Employment Administration (CETA) put 750,000 people to work.

So what about “America Works”?

Well, as a direct job creation proposal, it’s a bit over-budget. According to estimates by economists Alan Blinder of Princeton, Kevin Hassett of the American Enterprise Institute, and Larry Mishel of the Economic Policy Institute (and when’s the last time you saw AEI and EPI agree about anything?), $500 billion in direct job creation would employ a good deal more than the 10 million people Frank Underwood intends to put to work – more like 14 million. Indeed, you could put everyone unemployed in Frank Underwood’s America to work for a comparatively cheap $350 billion. One of the great ironies of economic policymaking is that direct job creation is often thought of as an extreme left position, compared to traditional Keynesian economic policy (which relies on the multiplier effect from increased demand to produce employment), when it’s actually much more efficient at creating employment for the least amount of money.

And given that Obama managed to get $787 billion together for the American Recovery and Reinvestment Act of 2009, while actually increasing entitlement spending ($87 billion for Medicaid, $25 billion for COBRA, $40 billion for Unemployment Insurance, $20 billion for Food Stamps, $14 billion for Social Security, and $3.2 billion for TANF and WIC), the $500 billion in entitlement cuts that Underwood proposes are being driven by ideology and political calculation rather than policy necessity. And despite whatever mechanism the showrunners might have to swing public opinion around to Underwood’s side, there’s a reason why presidents from Reagan to Clinton to George W. Bush to Obama have found it politically impossible to cut Social Security, Medicare, and Medicaid – whether it’s the go-go 80s, the 90s boom, the post-9/11 era, or the Obama era, the electorate believes in Social Security and Medicare and will fight to keep them.

Finally, a word on the choices of investment. Of the three categories of spending, two of the three don’t actually fit the category of direct job creation. Infrastructure investment and public/private partnerships, while good and worthy in itself and a superior form of stimulus to tax cuts, are less efficient at producing jobs than direct job creation. As the legendary economic John Kenneth Galbraith found out in his 1940 study, “The Economic Effects of Public Works Spending,” the WPA direct job creation program (which topped out at 3.5 million workers) produced a man-hour of employment for 55 cents compared to the Public Works Administration’s (an infrastructure program which topped out at 600,000 workers) $1.12 an hour, because the government directly employing the unemployed avoided the need for the profit margins of private contractors, who moreover traditionally invest in labor-saving machinery to minimize their workforce. Really, the only proposal that works as direct job creation is expanding the size of the military, but that’s mostly because we pay our soldiers very little, with a E-1 private earning a maximum of $17,892 a year.[1]

On the other hand, Underwood’s policy is much better than that of the EU. With economic growth flatlining since 2012 and an EU-wide unemployment rate of 10%, the new chairman of the EU Commission has proposed a three-year  €315 billion investment plan – except that only €8 billion will be coming out of the EU’s coffers, only €2 billion of which is new spending, and the other 97% is presumed to materialize out of private markets. The problem with this is that, even if this was €105 billion a year in new money, and all of it was spent on direct job creation rather than on infrastructure, that’s only enough to put 3 million Europeans to work at a time when twenty four million are out of work – reducing the unemployment rate only to a still sky-high 8.75%. But given that we’re only looking at €2 billion in new spending, we’re more looking at work for less than 64,000 people.

So congratulations, Commissioner Juncker, you’re officially to the right of Frank Underwood.

[1] http://work.chron.com/average-salary-us-soldier-9060.html