The US unemployment rate has risen above 10% for the first time in 27 years, leaving the US in a state of despair.
President Barack Obama will hold a jobs summit on Thursday, focused on job creation.
Although he has included business leaders amongst the 130 experts attending the summit in Washington, Republicans in Congress will opposed to any major spending plans.
President George W Bush has already frustrated them by spending billions on bailing out the banks and car makers.
The “big government” image and creating big financial defecits to be paid for by future generations are unpopular in Washington.
Economy.com’s Mark Zandi believes deficits are a major worry, but we can’t afford to be concerned about it now.
“That’s a problem not for 2009, not for 2010. That’s a problem for 2011, 2012 and beyond,” he says.
“We have to make sure that we don’t go back into a recession, because if we go back into recession, the cost to taxpayers will be even greater.”
“The deficits will be measurably larger, so I think it’s important to spend more money now.”
According to Mr Zandi, government spending needs to be aimed at assisting local government offices, as with tax funding falling, many employees are at risk of losing their jobs.
President Obama is on the look out for new ways to combat unemployment.
Unemployment benefits usually run out after six months in the US, but have been extended because of the highest unemployment rates.
Mr Zandi believes continuing with providing benefits to the unemployed as essential to maintaining demand, as those with no money make no purchases.
That situation could develop into a ‘catch-22’, downward spiral, as consumers that don’t consume, results in businesses cutting their workforce, causing more unemployed with no money to spend.
Another area where Mr Zandi feels the government can make a unique contribution is providing credit to small and medium-sized businesses.
Banks are still cautious over lending after the credit crisis, but have always given capital to start-up companies to help them expand, and these new businesses usually provide America with the majority of new employment.
Mr Zandi believes that “it’s clear that even when the economy gets back on its feet, we’re going to have very high unemployment in many parts of the country for a long time to come.
“One reason is that the people out of work don’t have the skills and education necessary to be employed in the jobs of the future.”
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