Direct Job Creation: Why? Why Not??

June 12th, 2011 at 2:05 pm

An NYT editorial today suggests that the federal government do some direct job creation to offset the weak economy.

Why don’t we?  Why won’t we?  Why didn’t we do more of that in the Recovery Act?

Is it because, as a Republican mantra would have it, “the government doesn’t create jobs—only the private market can do that?”

Um…that can’t be it.  There are over 20 million gov’t jobs, about 17% of the total right now.  And remember a few months ago, when temporary Census-taker jobs were boosting the employment rolls?  It’s true we can’t have a robust job market if the other 83% aren’t generating jobs.  But do me a favor—the next time someone touts that mantra, change the channel, stand up and shout something, or just do whatever it is you do when you hear an untruth.

Why didn’t we do more of this in the Recovery Act?  We actually did a number of things that are awfully close.  State and local aid to states preserves public-sector jobs, and we know that many hundreds of thousands of teachers, police, firefighters and others were kept on the job thanks to the stimulus.

Also, infrastructure spending was contracted out to private firms to build roads, repair bridges, improve airports, water systems, etc.  Again, not direct—the employer was private, not the Feds—but close.

And summer jobs programs were also part of the Act, and that’s direct job creation too.

But why didn’t we go further and should we do so now (in my vernacular, this is a should more than a could right now, but put that aside for a moment)?

The constraint is in part, ideological.  In today’s economics, direct job creation buys a bit into the thinking behind the R’s mantra.  The idea is that since government doesn’t face a profit motive and is fraught with politics that are at worst corrupt, and at best, porky (as in, “I’m not thinking efficiency when I suggest we do X, I’m thinking about bringing home the bacon to my constituents, funders, etc.”), it will make sloppy, inefficient choices that waste taxpayers much-needed dollars.  The gov’t sector simply doesn’t face the market discipline to make good choices.  It will pick losers, while the private sector will either pick winners and prosper or, if not, the market will quickly punish the privates for their bad choice.

George Miller had a bill a few years ago that got close to direct job creation—the Local Jobs for America Act—that amplified and extended some of the Recovery Act policies noted above.  I raise it because the objections to it at the time are instructive.  Miller’s bill would have sent well over $100 billion to local governments and non-profits to preserve public jobs and, on the non-profit side, hire people to provide public services, like training, counseling, even cleaning parks and improving local infrastructure.

But while there was some support, there were lots of concerns about local boondoggles.  Recovery Act funds were under great scrutiny, and there’s a valid concern that the more you unleash them without a leash, i.e., send them to others to dispurse, the more you (the Feds) are going to get whacked when some mayor uses the dough to spiff up his Friday night poker game.

Better to give folks a tax cut, this thinking goes, let them decide what to do with the money, and hope that leads to some jobs.

We did a lot that—a third of the stimulus was tax cuts—and the multiplier on them, especially when they go to folks who need the money (and will thus spend, not save it), is pretty high.  (BTW, that’s why the high-end Bush tax cuts make for lousy stimulus.)

There are also implementation constraints.  Back in the New Deal era, there were fewer hoops to go through to get a big government project up and running, and considerably less scrutiny regarding environmental impact, hiring rules, and so on.

And again, do not dismiss the scrutiny factor.  We were deeply committed to making sure this money wasn’t wasted, and that dog never really barked for a reason…it couldn’t find hardly any bones to pick.  But that also meant projects had to be pretty obviously worth it (it also meant there was a tradeoff here between speed and oversight).

So is the NYT wrong?

No, I think they’re right.  And while I share the concerns re boondoggle, corruption, and the mayor’s poker-game risk, I think we should try to do something in this space.  If anything, I think the notion that you can only count on the indirect multipliers—give people and firms money and hope their spending creates jobs—is way too limiting.  We should do it, but it shouldn’t be the whole, or even the half, of our efforts.

I’ve even got a project for you: repair, insulate, and green-up the nation’s public schools.  The benefits range from good jobs in a sector with very high unemployment, energy savings, a great public service for one of society’s key institutions, and this kind f thing has even been found to reduce racial test score gaps.

Details to follow, but read this, and tell me why this “should” shouldn’t become a “could” if not a must.


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19 comments in reply to "Direct Job Creation: Why? Why Not??"

  1. James says:

    My issue with the Democrats is the quivering fear factor. One thing you can say about the Rs, they go ahead and do it, get it done, stand up and defend their beliefs and their policies. Whether their ideas work or whatever you think of their policies, THEY believe in them. The Dems come off reeking of cowardice, and utterly unprincipled.

    What Dems haven’t figured out is that the Rs move ahead with their controversial stuff right AFTER an election, taking the heat and laying markers, changing the conversation and setting the agenda. Round about April before an election, they get real moderate, while orchestrating media frenzies that leave a residual bad taste about their opponents. It doesn’t matter that the frenzy was bunk. (Remember the media frenzy about Wes Clark saying that he didn’t think that being shot down in an airplane was qualification for being President? That put an end to his political ambition, right there. Sounds silly now, doesn’t it?)

    By contrast, what the Dems do is start cowering right after an election, quivering in fear over bad press and utterly unable to change the conversation. And it gets worse from there.

    • Maddie says:

      Blatant ad hominem attack on democrats (cowardice and unprincipled). Just thought you should know that

  2. Tom Cammarata says:

    I would suggest that the Republican cant again public stimulus projects is purely and only political. They are committed to stymying any effort by the Obama administration to improve economic matters.

    Their goal is to keep President Obama from being reelected, and to putting more conservative Republicans in the House and Senate in 2012. Period. A lousy economy with high unemployment is their tool of choice to achieve this goal. Unhappy voters usually vote against incumbents, regardless of who caused their unhappiness.

    The pragmatism of the Republican leadership dictates hamstringing the economy, along with any financial reforms that hurt their high-pocket contributors shielded by Citizens United. If this costs financial ruin and emotional torment among those 9% unemployed — or those hovering near that point — well, that just too bad. Fortunes of war, and all that.

    Republican ideology only really comes in as a glossy, pseudo-intellectual pablum (e.g. Paul Ryan’s budget plan) dolled out for media coverage, no matter how often such silly Orwellian arguments (austerity brings prosperity!) have been refuted (or should I say “refudiated”?).

    Republican savants like Grover Norquist are intellectual graffiti artists, painting showy slogans to hide a dilapidated wall.

    I know this is hardball politics in the 21st century. But what I don’t understand is why the Democrats let it all go unchallenged.

  3. Bob Wyman says:

    The Republican mantra may be: “the government doesn’t create jobs…” but what they actually mean is that “the government shouldn’t create jobs…”
    What Democrats can’t seem to understand is that we’re not engaged in an objective debate about economics but rather a philosophical debate about the proper role and scope of government. Thus, Democrats spend a great deal of time vainly refuting irrelevant propositions while rarely touching on the real substance of the issue. The debate isn’t about what the government *can* do, it is about what the government *should* do.

    No matter how much evidence “proves” that government job creation programs can or have been successful, it is useless when presented to someone who simply believes that government *shouldn’t* be creating jobs. The real challenge here is to argue why our government *should* create jobs. Only when that has been accepted is it useful to argue whether or how the government can best create jobs.

    • Mary Filardo says:

      Agree that the debate needs to be CAN government create jobs, but SHOULD government create jobs. Where this issue crosses our work at the 21st Century School Fund is around a federal role to address deteriorated and substandard public school buildings–they do almost nothing. Nearly all of the advocacy around this issue at the federal level as been about the need for better school facilities. But this is not the problem–there is nearly universal agreement that buildings in good condition are better than those not in good condition and ALL children should be in adequate school facilities.

      The issue is who should be responsible? In this case, different from jobs, in general, at least there is a general consensus that it is a public sector responsibility. However, there is no consensus on which public sector should carry the most weight–local school districts? States? What is an appropriate federal role to this $100 billion a year?

      We need to have clear theoretical, philosophical and practical cases made that PK12 educational facility infrastructure should be the responsibility of local, state and federal government. Each should be involved in ways that align to the unique powers and responsibilities of the various levels of government. This local, state and federal partnership will advance educational adequacy, equity and efficiency in the delivery of school facilities–it will also help create jobs–almost entirely in the private sector.

  4. foosion says:

    It would make sense to do necessary building and repair now, when things are cheap (labor, interest rates, etc.), rather than later when things are more expensive. Buying things on sale is a better idea than paying full price.

  5. Kevin Rica says:

    Einstein defined insanity as “doing the same thing over and over again and expecting different results.”

    The problem is that until one staunches the bleed:

    of aggregate demand to China and other countries that manipulate their exchange rates to keep our external accounts in deficit, and;

    of jobs to illegal immigration and even to poorly manage legal immigration;

    the direct job creation schemes won’t work.

    The Administration has distorted and diminished Keynesian economics into the little that they have the guts and imagination to do. And doing THAT again and again won’t work. Trying it again and again is insanity!

  6. David R says:

    “Government has never created one job” is a mantra that is spoken by Conservatives and the news media let’s it go. Economists let it go because it hurts so much to stoop to the level of having to refute nonsense. As long a powerful lies like that exist it will be very difficult to convince policy makers to take the correct path. Some of us are trying to counter the insanity, but it is lonely work.


  7. pjr says:

    I think there are several such “shoulds” that ought to become “coulds” but it would take strong leadership. I have conservative Republican friends who think we need to fix our schools and infrastructure and energy dependencies, and that high income tax payers in particular need to contribute more, but Obama has not appealed to people to support bold policies. Obama would have to be convinced to put himself on the line by asking voters to support a true recovery focused on jobs, rather than more tax breaks for the employed and wealthy in the vague hope that they’ll do more than keep our economy afloat. They won’t.

  8. Southern Beale says:

    I’ve even got a project for you: repair, insulate, and green-up the nation’s public schools.

    But that was in the original bill and it got cut! From the memory hole, here’s the stuff that got taken out:

    And from the CNN memory hill, here’s the GOP’s list of what they considered “wasteful spending” in the stimulus:

    There were lots of good projects on this list, but two really stand out:

    • $500 million for flood reduction projects on the Mississippi River — considering the massive Mississippi River flooding of this spring, which included Memphis in my home state of Tennessee, I wonder why no one ever bothered to bring this up?

    • $650 million for wildland fire management on forest service lands — someone tell Arizona which is currently in flames right now.

    Republican fiscal hawkishness makes us less safe, plain and simple. It’s Bobby Jindal’s dig about volcano monitoring all over again. I can’t understand why anyone would think a Republican should be near the reins of government. If your guiding philosophy is that government is the problem, not the solution, then what the heck are you doing in government to begin with? It’s like going to a vegan butcher. If you don’t believe in it, then of course when you do it it’s going to suck!

  9. Michael says:

    Isn’t there a generally agreed-upon $2 trillion infrastructure repair backlog? I thought the idea was that everyone agrees that whatever other projects we have, it’s probably a good plan to keep the current stuff functional. Surely at least the top half of that is uncontroversial, right?

    • Sandwichman says:

      Larry Summers wrote in the Financial Times today:

      A sick economy constrained by demand works very differently from a normal one. Measures that usually promote growth and job creation can have little effect, or backfire. When demand is constraining an economy, there is little to be gained from increasing potential supply. In a recession, if more people seek to borrow less or save more there is reduced demand, hence fewer jobs. Training programmes or measures to increase work incentives for those with high and low incomes may affect who gets the jobs, but in a demand-constrained economy will not affect the total number of jobs. Measures that increase productivity and efficiency, if they do not also translate into increased demand, may actually reduce the number of people working as the level of total output remains demand-constrained.

      Where was this Larry Summers when we needed him?

      • Kevin Rica says:

        I notice that Larry Summers still seems to avoid noticing the continued Chinese acquisition of U.S. Treasuries (an inflow of savings).

        That flow of savings sustains the current account deficit (a crippling drag on U.S. aggregate demand) and makes it impossible to end the recession by restoring the savings- investment balance at a higher level of U.S. output.

        In effect, China is exporting the recession that is rightfully theirs and Larry Summers looks the opposite way.

  10. Jim Edwards says:

    What’s good for the big three is good for America used to be the saying. It’s still true. What worked for GM was a massive borrowing of funds to modernize and streamline its infrastructure so it could get back and compete successfully with the world. Sound familiar? We need to borrow so we can modernize and streamline our infrastructure so we can compete successfully with the world.

    A real business man, someone who wants to build a successful company rather than a pump and dump Romney type, would look at the company called USA and think borrowing is cheap, I have critical repairs to make, I’m losing my business to China because their stuff is all shiny and new, they are saving money because new stuff requires less maintenance, and if I don’t do something I’ll be gone. A real businessman would borrow all he could to make those changes.

    Our infrastructure was designed with a slide rule and a Univac, China’s on a Cray. Republicans warned saving GM would upset the “free” market. It’s better to do nothing. They say the same thing about the US economy. Why isn’t that an easy sell?

  11. James says:

    Here’s a question for *you.* Why *don’t* all these shoulds become coulds? What does it look like on the inside when there is clear consensus out here in the real world, by the overwhelming majority of the public, that jobs is the number one priority, right NOW?

    What does it look like inside the administration when the only legislation that can pass is the worst, most atrocious, outrageous bills — the PATRIOT act, MCA, bringing down the wrath of the full Senate upon little ACORN like a piledriver squashing a little gnat. Tax cuts for the rich, legislation to benefit the banks. These bills pass with sweeping, sweeping majorities. By contrast, every nickel that might benefit real people — unemployment, jobs, health care, disaster relief — is an excruciating process of wheeling and dealing, giving away the farm.

    I don’t want to hear that there wasn’t political “consensus.” Bunk! WHY NOT? What can we in the rank and file do, or what can we do differently, so that the administration and the Congressional Dems don’t give away our Medicare and Social Security for fear of being criticized by the GOP?

    Why does the Obama administration and the Congressional Dems allow the minority party to run the show. That’s a serious question.

  12. AlanDownunder says:

    Australia weathered the GFC better than any other advanced democracy – the only one to avoid a recession. Some of that was due to only slightly reduced Chinese demand for its minerals, some more was down to a $900/person cash giveaway, but a school maintenence and building program and a home insulation program also weighed in significantly.

    Unfortunately, private sector cowboys gave the insulation program a bad name and the Murdoch press exaggerated it, blaming the federal government for not taming the cowboys (while still, of course, venerating private enterprise). The blame game cacophony spilled over into opportunistic badmouthing of a very well run schools program.

    I imagine there are people inside the White House who would read this and say “I told you so”, ignoring the fact that Australia has the runs on the board that they so clearly lack. 5% unemployment anyone?

  13. comma1 says:

    Congratulations, with your jobs program you managed to not lose every job in America. How about you stop protecting the ineffective Obama policies that have us at over 9% unemployment close to 3 years after this began, and start suggesting something that is of benefit today. You aren’t even taking part in the “should, could” argument. You are taking part in the “did” argument. And that’s a loser. America needs to make things. America needs to look to the future and act. America needs a leader and Americans need jobs. People need to take their heads out of the sand, and stop looking toward large companies — those companies aren’t innovating in anything other than labor costs and geopolitical maneuvering.

  14. Rich C says:

    Don’t forget that we can create a lot of jobs in services, such as child care and elder care, that are in high demand but that don’t require jumping through much in the way of regulatory hoops (no Environmental Impact Statement, etc.). For construction projects, I think the schools retrofit is a fine one, but just giving homeowners money (say, via universal mortgage principal reduction plus fully refundable tax credits for green retrofits) would also create a lot construction jobs. And, as Brad DeLong and John Geanakopolos have argued for a while, you don’t need Congress to do anything to get the principal reduction program going.

  15. J Foster says:

    “The government doesn’t create jobs, only the private sector does” misses the point in many ways.

    The private sector operates on self-interest, not out of concern for the common good. That’s what the private sector is supposed to do.

    When there’s a huge economic crisis, the only entity that *can* act not out self-interest but for the economy as a whole is the government, which is just a collection of people after all.

    Robert Reich made a complete fool out of the Republicans he was surrounded by on This Week, this week, despite being outnumbered by them left and right. The Republican Senator claiming that businesses are sitting on these huge piles of cash and not spending or investing because “they’re worried about the deficit” was utterly absurd. If businesses had customers they’d be clamoring to gear up as fast and furiously as possible to sell things to them, it’s ridiculous to imagine that they’d hold back because of some fear of the deficit being too large.

    This is Republican voodoo, as it’s been known for many years now, and unfortunately this Administration pandered to it almost as much as the Republicans.

    Which was tragic. Truly tragic.