The Republicans, deeply dinged by a politically damaging foray in badly designed Medicare reform, are trying to shift the conversation to jobs. Based on my post yesterday on excess capacity in the job market, I’m all for that conversation. (Wow, Eric Cantor must be reading my blog…cool! Yo, Eric…whassup!?)
But as Ezra and Paul point out, there’s nothing in there that we should expect to help much. Tax cuts, deregulation (the Obama admin is going there too), trade deals, and that job-creating juggernaut: patent reform.
The important question here is what should we be doing on the jobs front? Or, more specifically, what should we do that we could do.
One can and should wax about optimal ways to rev up the American jobs machine, which has thankfully shifted out of reverse but remains stuck in low gears. Yet given our political dynamics, if those ideas represent traditional Keynesian stimulus, they’ll be…um…hard to get through Congress. I’m all for a good fight, but with unemployment at 9%, and underemployment at 16%, we need more than a fight. We need a win.
[Brings to mind the great Tom Lehrer lyric: “Remember the war against Franco? That’s the kind where each of us belongs. Though he may have won all the battles, we had all the good songs.”]
Are there any ideas that might pass muster in this climate? One way to think about the problem is as the intersecting circles in a Venn diagram where one circle contains job-creating measures D’s typically favor and the other one has measures R’s favor. Is there anything in that vanishingly small intersection?
Tax cuts are in there, and they’re of course part of the R’s plan, but given the difficulty of enacting truly temporary tax cuts—remember, stimulus should be temporary—and given the fiscal need to raise more revenues once the jobs machine is fully up and running again, I wouldn’t go there.
Infrastructure is in there too—R’s like to cut ribbons as much as D’s, and the country has deep needs for non-porky investment in this space.
David Leonhardt offers some good ideas, suggesting that policy makers, including those at the Federal Reserve, need to take out an “…insurance policy on the recovery.” He adds:
“The White House and Congress, meanwhile, could begin talking about extending last year’s temporary extension of business tax credits, household tax cuts and jobless benefits beyond Dec. 31. It would be easy enough to pair such an extension with longer-term deficit reduction.”
I agree but there’s an important and underappreciated concept to be mindful of here: fiscal impulse. Keeping things going that are already in the system don’t give you any more boost. They can, of course, prevent an air pocket by not going away, but we also arguably need more than we’re already doing.
A few other ideas:
—help exports by continuing to put pressure on countries like China that manage their currency to boost their exports and block ours—this one’s very attractive because it doesn’t add to the deficit. I think this Levin bill is interesting and it has bi-partisan support.
—do not go gentle in the current spending cut debates! Whether it’s food stamps, unemployment insurance, tax credits for low income kids and workers, TANF benefits, etc., this is very bad time to cut resources to beneficiaries of these programs—and if we want fiscal impulse, we should expand them. For one, the recipients of these benefits have been hit the hardest by the downturn so they’ll spend, as opposed to save, the money. That helps generate more economic activity—high multipliers and all that. For another, with unemployment high, some of the usual arguments that expanding these programs creates the wrong incentives are particularly dubious. And again, any such expansions of benefits could be temporary until things improve.
More to come later.