After the Senate approved the $700 billion bank bailout, the majority leader, Harry Reid, tried to persuade his colleagues to address another economic calamity before they left town for the long election recess. He urged them to extend unemployment benefits for 800,000 jobless Americans.
In the face of Republican opposition, the measure failed. Benefits start expiring this month.
If it works as promised, the bailout will thaw the credit freeze and keep more banks from going under. But it is unlikely to save even more Americans from losing their jobs and homes.
The Labor Department reported on October 3 that 159,000 jobs were lost in September. That is the biggest monthly drop in five years and the ninth straight month of job contraction. It brings total job losses for this year to 760,000.
Of the 9.5 million Americans now out of work, two million have been jobless for more than six months. Nearly 6.1 million people are working part time because they cannot find fulltime work or because slack business conditions have led to fewer hours - and less pay.
Cutbacks in hours and pay are especially pernicious because for most of the Bush years, wage growth has lagged behind worker productivity and prices. As Americans have worked harder they have fallen further behind. The only good news - if you can call it that -
was that credit was easy.
As a result, many Americans today have no savings and are deep in debt. That means they are even less prepared to take care of themselves and their families when they lose their jobs.
Conditions are only getting worse. Personal spending stagnated in August, the latest month with government data. Auto sales plunged in September. Factory orders are off. New home sales fell to a 17-year low in August, according to the Census Bureau. And home prices continued to fall sharply in July, for a decline of 16.3 percent over 12 months, according to the Standard & Poor’s/Case- Shiller index of prices in 20 major cities. There is no sign that prices have hit their bottom.
Exports, the one bright spot, are also set to fall, because many other nations took part in America’s financial follies and are now faltering as well.
All that weakness means that more Americans will lose their jobs in the months to come. Extending unemployment benefits is the least that Congress can do to help. The House overwhelmingly passed a bill to do that before it left Washington. The Senate must take the bill up as soon as it returns later this year.
There is a lot more work to do to fill in the gaps of the bailout bill. It does virtually nothing to prevent foreclosures and keep Americans in their homes. Congress must finally change the code to allow a bankruptcy court to reduce the size of bankrupt borrowers’ mortgages.
A new stimulus bill must also be developed. It must include bolstered food stamps and aid to states and cities, so that they can continue to provide health care and keep paying for construction and other projects that provide desperately needed jobs.
The meltdown on Wall Street is only part of a larger meltdown, and the bailout bill is only one attempt at a fix.