President Obama announced he will be coming out with a jobs bill after Labor Day. Here's hoping it will be something really big, because that's what the country needs. Incidentally, it would also be good politics for him too.
To start with, it's long past time we had a big jobs push. The fight over the debt ceiling that lasted most of the summer was a distraction from what most of the American public was interested in and what the economy really needs. The original stimulus from 2009 stabilized the free-fall but now has largely run out. This latest round of Republican-pushed budget cuts, to take effect sometime in late November, will do nothing for jobs. Spending cuts do not produce jobs; to the contrary, in order to institute them jobs will have to be cut. That's been the problem as job creation has stalled the past few months: modest gains in the private sector have been offset by downsizing in the public sector.
No doubt there will be some tax credits for companies that fill new positions in Obama's plan, but he needs to go farther. The principal reason hiring is slow is because consumer demand is weak. Consumer spending is 70% of the U.S. economy. Corporate America has been enjoying strong profits of late by cutting jobs and boosting productivity. Indeed, 96% of the top 500 companies were profitable over the past 12 months. They are sitting on an estimated 2 to 2 and a half trillion dollars in cash. American companies produced 1.0 million jobs in America in the pat year but 1.4 million overseas. The reason is that with high unemployment, skittish lending and hesitant buying patterns, demand is picking up faster overseas than here. Source for this paragraph. The solution? We need more jobs here, more money in the pockets of American consumers.
Since private business is not doing it, not only incentives but direct government hiring ought to take place. Many have called for a big push on infrastructure construction for part of this program. You can expect an "infrastructure bank" to be part of the Obama proposal in September. That is a good idea and ought to be done, but I feel his proposal ought to go farther. We have 8 million people out of work. Consider that directly funding 1 million jobs at $35,000 a year would cost $35 billion. When you consider a year of the war in Afghanistan costs three times that much or that the yearly deficit is expected to be over $1.2 trillion (thirty times that much) that amount is a relative bargain. If Obama were to propose opening up 2 million jobs right now for $70 billion it would have an electrifying effect on the unemployed and the economy. And for you fiscal hawks, it would only add 6% to the yearly deficit. Former Secretary of Labor Robert Reich has a ten-point plan for jump starting employment that makes a lot of sense. It includes a mix of tax and regulatory changes and direct government actions. Take a look at it here.
There is certainly plenty for 2 million people to do. Everything from classroom aides to neighborhood cleanup to weatherizing buildings to transportation maintenance to the huge backlog of postponed work at National and State Parks to care for the elderly--there are a host of productive things that need doing, would help the country, would restore a sense of purpose and hope in the lives of the unemployed and would return $70 billion of buying power to the economy.
It would be good for the President politically too. Would the Republican-controlled House of Representatives refuse to go along? Almost certainly yes. Their preference is Hooversim; do nothing and hope for the best. The contrast between a strong program to directly provide millions of jobs juxtaposed with further excuses for more inaction could only work to Obama's advantage in next year's elections.
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