Changing the Subject: Where Are the Jobs?

May 27th, 2011 at 11:54 am

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.

Print Friendly, PDF & Email

16 comments in reply to "Changing the Subject: Where Are the Jobs?"

  1. foosion says:

    How about cutting everyone’s taxes by $10,000, including a refundable credit for those without enough income? That would be a tax cut that would do a lot of good.

    Alas, this is not likely to fly with the Republicans, as tax cuts for them means cuts in the top marginal rates rather than anything meaningful for the middle class or lower income.

  2. Sandwichman says:

    “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.”

    If you think you already know the answer to the question you’re asking, maybe you’re asking the wrong question. Instead of asking what we should be doing or could be doing, we need to be asking why the enormous indifference — even hostility — to those shoulds and coulds? Could it be that people in a position to act and people in a position to influence policy have other priorities? What are those priorities?

  3. Steve Goldstraw says:

    past 11 years we have 13 million more people in the labor force

    and almost 1 million fewer private sector jobs than we had in Jan 2000
    and gov’t jobs are only about 2,000,000 higher to about 22 million in past 11 years

    That was a trillion dollars down the drain

  4. beowulf says:

    Well, as I pointed out in an earlier thread, Secretary of the Treasury has been delegated (probably by accident) unlimited coin seigniorage power:
    (k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.—-000-.html

    And since “United States coins and currency… are legal tender” Tsy can fund spending by depositing enough jumbo denomination coins with the Fed (via the Mint Public Enterprise Fund). Fed Fund rate could still be pegged, without borrowing, via paying interest on excess reserves. But that doesn’t answer Jared’s question. However, there’s another way to use coinage power.

    Sadly, the administration dropped the ball when the Coinage Act was amended (by voice vote) in December. It should have tried to slip in authority for the Secretary to rebase the penny (alas, now it will take another Act of Congress). See this op-ed by crackpot economist Austan Goolsbee.

    Goolsbee suggested that the penny be rebased from one cent to five cents. But what if the 140 billion pennies in circulation were rebased to $5? In a sort of a reverse helicopter drop, it’d be a $700 billion fiscal stimulus at no cost to Tsy (or anyone else, vending machines don’t take pennies anyway).

  5. rootless_e says:

    The only practical solution is for the Fed to be pushed into purchasing transportation and energy construction bonds. Freddie and Fannie could be made to insure ’em if needed as CMBs. This would reduce the deficit while increasing stimulus spending and would bypass the Republican/Confederate attempt to destroy the economy of the Union.

    • rootless_e says:

      It could be called “operation greenback” in honor of the way Lincoln paid the union armies when faced with Democratic Party efforts to support the Confederacy by cutting off funding.

  6. 51steps says:

    The elephant in the room that is currently a taboo “no no” in the deficit debate is the fact that the country is immensely rich, if only one would take into account the net worth of the top 1% of the population. The top 1% of the country comprises ownership and control of 40% of the national wealth or about $20 trillion dollars, dwarfing our Federal debt, which under currently adopted rules of the national debate is considered off limits and untouchable, e,g, untaxable, as a means to solve the government deficit problem. A 7% tax surcharge on this billionaire property wealth would handily and simply wipe out the $1.4 trillion annual Federal deficit. But, alas, the billionaire funded “Taxed Enough Already” program that so many of the remaining 99% of the population were “conned” into supporting with their 2010 votes against their own average American’s self-interest is the rule of the day. If half the $20 trillion in the hands of the top 1%, thanks to decades of inadequate Federal taxation, ala the supply side argument, were now going forward under enlightened sufficiently aggressive tax policies devoted to now reduce the national debt by $10 trillion to 1/3rd of GDP, the poor top 1% would be reduced to at most in a zero sum world an average per capita net worth of only $3.3 million as compared to $6.7 million currently. Is that too much to ask those who enjoy the most benefit in America to contribute to preserve the health, safety, and minimal financial security needed by the other 99% of average Americans? Actually with sufficient revenues the Federal government could afford to address the workforce re-education and unemployment problem with the attendant corollary problems of housing foreclosure as well as tackle the renewable energy and energy independence challenges and declining transportation infrastructure, all of which needs are being strangled off by the currently dominate austerity campaign. Thus it is hard to believe that the estates and net worth of a more heavily taxed top 1% would suffer if the government was financially enabled to combat our woes and pull us out of our current economic depression, and that taxation of the wealthy would actually “Not” be a zero sum loss for that sector of society, which is currently sitting on it’s hands, frightened, and unwilling to help the economy. This not a class warfare question! This is a practical question of what must be done to save financially 99% of all Americans and preserve the United States AAA credit rating after years of improvident tax policy. But as the Supreme Court says, “ Money is speech.” Thus, the taboo not to openly discuss the elephant in the room, taxation of wealthy. The top 1% have more legally defined discretionary “Speech” than all the bottom 99% put together. Well, let’s gather enough “Free Speech” courage to openly discuss our REAL DEFICIT MATH PROBLEM, income inequality, once and for all!

  7. NoPolitician says:

    Is it possible that due to our current economic structure, namely tax codes and policies that funnel money to the wealthy coupled with a massive shift of goods in the consumer market to other countries, is preventing any stimulus from working?

    Let’s say that we give everyone who earns under $25,000 a check for $5,000. They’ll definitely spend it, but on what? Maybe they’ll pay down some debts — so the money goes to the rentiers, who speculate with it. Maybe they’ll take a trip to Wal-Mart, so Chinese manufacturers will get much of that, the balance will go to a bunch of rich guys who architected the offshoring of those jobs. Or maybe they’ll take their family out to dinner at TGIFridays, meaning that a few middle-class workers may be hired in Roanoke at their HQ, and another waitress may be added at $2/hour plus tips.

    It seems that an economy is all about the flow of money, and that since the economy has “gone global”, most of the USA can no longer participate in that flow. That seems to be what we need to do — flow the global money into all corners of our country, to people of all colors, shapes, sizes, and skills.

  8. pjr says:

    Infrastructure is top of the list, but additional contracts to produce clean energy should be next. Create new, good-paying jobs in construction and energy sectors. The problem is that this takes money and we already have a huge deficit, much caused by record-low taxation of record-high corporate profits and top-earners. Temporary large tax hikes for these two groups (for 2-3 years) could fund the projects we need to boost employment and create demand from new customers with money. Businesses will hire and expand, and we’ll actually have a recovery before the temporary tax hikes expire. Surely by now we see the need for this. Tax cuts won’ work well, for many good reasons that we’ve seen play out.

  9. Paul J says:

    Just curious. Why does nobody mention raising wages, thereby helping to close the growing productivity/wages gap? Have we all simply bought into the Republican cant that higher wages cost jobs, so we can’t go there? When did raising the minimum wage in the past result in massive unemployment? Wages increased most during the Clinton Administration, which also brought about the biggest increase in jobs, and an elimination of the budget deficit to boot. Don’t put all the burden on putting more money in people’s pockets on tax cuts. Some of those record profits could be shared with the workers who helped create them. Raise the minimum wage. Strengthen labor laws.

    • rootless_e says:

      Given the GOP control of the House and veto ability in the Senate, one is kind of constrained.

  10. urban legend says:

    Tax cuts are going to accomplish absolutely nothing to restore public confidence in the future. Until people start to believe that if they spend they will be able to replace it with future income earned on a job — either their current one or an easy-to-find new one if necessary — they will continue to hunker down. WPA stuff intended to be temporary won’t do it, either. It must be evidence of rapid growth in permanent, well-paying, socially becessary jobs, and ones that will be hard to out-source.

    There’s only one sector that comes to mind, the one, in fact, that has been neglected for a generation and needs a generation of attention. Democrats and traditional Republicans know exactly what that sector is. It is the one and only way out of this mess. Until Obama musters the courage to fight hard for it against all the headwinds, even to risk his Presidency in the process of carrying that fight to the American people, with the possible political reward that people will finally see him fighting for them in ways that are easy to understand, and the potential policy reward of building so much public support that it will become very hard for legislators to resist, we will never get out of this morass.

    I don’t know whether you call this “stimulus” or not, but under no circumstances can it be presented or perceived as temporary. The last boom in jobs, as weak as it was, was a phony boomlet powered by a real estate bubble. People sensed it was a house of cards, and that’s why confidence stayed depressed far below 2000 levels despite low headline unemployment numbers. Americans know there must be something big to replace the loss of that sector as well as the massive loss of manufacturing employment.

  11. Lars Olsson says:

    Yeah, but “the people who write ’em have no social conscience, I mean, they don’t even care if Jimmy cracked corn.” ;o) (Lehrer geekery FTW)

    • chris says:

      The tunes don’t have to be clever. And it don’t matter if you put a few extra syllables into a line…

  12. Measure for Measure says:

    Procuring a new weapon system would be a mistake, as most of the spending would take place far in the future. But could the US enhance its stockpile of boots, ammunition, bombs, spare parts et al?

    Meanwhile in the executive branch, how about adding some recess appointments to the Fed?

  13. Kevin Brock says:

    What good is extending unemployment benefits when states have the power to hold up payment of those benefits to the long term unemployed? That is exactly what is happening in North Carolina, where the new majority in Raleigh is holding over 40,000 unemployed and eligible for benefits hostage in a budget fight with the Governor.